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Variable Costing: A Tool

for Evaluating
Management Performance
Exercises

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Theories

Under the direct costing, which is classified as product costs?

A.Only variable production costs
B.Only direct costs
C.All variable costs
D.All variable and fixed production costs

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Theories

In absorption costing, as contrasted with direct costing, the following

are absorbed into inventory

A.All the elements of fixed and variable manufacturing overhead

B.Only the fixed manufacturing overhead
C.Only the variable manufacturing overhead
D.Neither fixed nor variable manufacturing overhead

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Theories

The absorption costing method includes in inventory

Fixed factory Variable factory

overhead overhead
A No No
B No Yes
C Yes Yes
D Yes No

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Theories

In an income statement prepared as an internal report using the direct

(variable) costing method, fixed selling and administrative expenses
would

A.Not be used
B.Be used in the computation of the contribution margin
C.Be used in the computation of operating income but not in the
computation of the contribution margin
D.Be treated the same as variable selling and administrative expense

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Theories

A type of managerial accounting which refers to the determination of

the operating cost regardless of cost behavior, whether variable or non-
variable, is
A.Differential accounting
B.Full cost accounting
C.Responsibility accounting
D.Profitability accounting

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Problems

Excellent Writer produces and sells boxes of signing pens for P1,000
per box. Direct materials are P400 per box and direct manufacturing
labor averages P75 per box. Variable overhead is P25 per box and fixed
overhead is P12,500,000 per year. Administrative expenses, all fixed,
run P4,500,000 per year, with sales commissions of P100 per box.
Production is expected to be 100,000 boxes, which is met every year.
For the year just ended, 75,000 boxes were sold. What is the
inventoriable cost per box using variable costing?

A.P770
B.P500
C.P475
D.P625

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Problems

For P1,000 per box, the Majestic Producers, Inc. produces and sells
delicacies. Direct materials are P400 per box and direct manufacturing
labor averagesP75 per box. Variable overhead is P25 per box and fixed
overhead is P12,500,000 per year. Administrative expenses, all fixed,
run P4,500,000 per year with sales commissions of P100 per box.
Production is expected to be 100,000 boxes, which is met every year.
For the year just ended 75,000 boxes were sold. What is the
inventoriable costs per box using absorption costing

A.P625
B.P500
C.P770
D.P670

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Problems

Compute for the inventory value under the direct costing method using
the data given: units unsold at the end of the period, 45,000; raw
materials used, P6.00 per unit; raw materials inventory, beginning,
P5.90 per unit; direct labor, P3.00 per unit; variable overhead per unit
P2.00 per unit; indirect labor for the month P33,750.
Total fixed costs, P67,500.

A.P16.90
B.P11.00
C.P17.45
D.P19.15

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Questions?

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