1. Which of the following costs is treated differently under variable & absorption costing? a. Direct materials

c. Variable factory overhead costs

b. Direct labor

d. Fixed factory overhead costs

2. Under absorption costing, fixed manufacturing overhead costs are best described as

a. Direct period costs

c. Direct product costs

b. Indirect period costs

d. Indirect product costs

3. Black Co.'s 2020 fixed manufacturing overhead costs totaled P 100,000 and variable selling costs totaled P 80,000. Under direct (variable) costing, how should these costs be classified? Period Costs Product Costs

a. P 0 P 180,000

b. P 80,000 P 100,000

c. P 100,000 P 80,000

d. P 180,000 P 0 Rationale behind the Difference

4. A basic tenet of direct (variable) costing is that period costs should be currently expensed. What is the basic rationale behind this procedure?

a. Period costs are uncontrollable and should not be charged to a specific product

b. Period costs are generally immaterial in amount and the cost of assigning the amount to specific products would outweigh the benefits

c. Allocation of period costs is arbitrary at best and could lead to erroneous decisions by management

d. Period costs will occur whether or not production occurs and so it is improper to allocate these costs to production and defer a current cost of doing business

Consequence 1: Inventory Costing

5. For P 1,000 per box, Gray, Inc. produces and sells delicacies. Direct materials are P 400 per box and direct manufacturing labor averages P 75 per box. Variable overhead is P 25 per box and fixed overhead cost is P12,500,000 per year. Administrative expenses, all fixed, run P 4,500,000 per year, with sales commissions of P 100 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 absorption costing?

a. P 500

c. P 670

b. P 625

d. P 770

6. Refer to No. 5, what is the inventoriable cost per box using variable costing? (use the same choices as No. 5)

a. P 500

c. P 670

b. P 625

d. P 770

Consequence 2: Profit Computation

7. White Company manufactures a single product and has the following cost structure: Variable costs per unit:

Direct materials P 3

Direct labor 4

Variable manufacturing overhead 1

Variable selling and administrative expense 2

Fixed costs per month:

Fixed manufacturing overhead P 100,000

Fixed selling and administrative 60,000

The company produces 20,000 units each month. What is the unit product cost under absorption costing?

a. P 10

c. P 13

b. P 12

d. P 15

8. Refer to the data in No. 7, what is the unit product cost under variable costing? (use the same choices as No. 7)

a. P 10

c. P 13

b. P 12

d. P 15

9. Refer to the data in No. 7, assuming there are no beginning inventories and 20,000 units are produced and 19,000 units are sold in a month. If the unit selling price is P 20, what is the profit under absorption costing for the month?

a. P 30,000

c. P 38,000

b. P 35,000

d. P 42,000

10. Refer to the data in No.7, assuming there are no beginning inventories and 20,000 units are produced and 19,000 units are sold in a month. If the unit selling price is P 20, what is the profit under variable costing for the month? (use the same choices as No. 9)

a. P 30,000

c. P 38,000

b. P 35,000

d. P 42,000