16. When production exceeds sales, fixed manufacturing overhead costs

a. Are released from inventory under absorption costing

b. Are deferred in inventory under absorption costing

c. Are released from inventory under variable costing

d. Are deferred in inventory under variable costing

17. During its first year of operations, a company produced 275,000 units and sold 250,000 units. The following costs were

incurred during the year:

Variable costs per unit

Direct materials P 15.00

Direct labor 10.00

Manufacturing overhead 12.50

Selling and administrative 2.50

Total fixed cost

Manufacturing overhead P 2,200,000

Selling and administrative P 1,375,000

The difference between absorption costing profit and variable costing profit is that absorption costing profit is:

a. P 200,000 greater c. P 325,000 greater

b. P 220,000 greater d. P 62,500 less

18. What best accounts for profit difference between absorption costing and variable costing method?

a. Difference in fixed costs incurred c. Difference in sales revenue

b. Difference in variable costs incurred d. Difference in inventory valuation

19. Lavender Company's income under absorption costing was P 3,600 lower than its income under variable costing. The

company sold 10,000 units during the year, and its variable costs were P 9 per unit, P 1 of which represents the variable

selling expense. If production cost was P 11 per unit under absorption costing, then how many units did the company

produce during the year?

a. 8,200 units c. 11,200 units

b. 8,800 units d. 11,800 units

20. Variable costing and absorption costing will show the same incomes when there are no

a. Beginning inventories c. Variable costs

b. Ending inventories d. Beginning and ending inventories

21. Absorption costing and variable costing differ in that

a. Standards can be used with absorption costing, but not with variable costing.

b. Absorption costing inventories are more correctly valued.

c. Production influences income under absorption costing, but not under variable costing.

d. Companies using absorption costing have lower fixed costs.

22. When sales are constant but production fluctuates,

a. Net income will be erratic under variable costing

b. Absorption costing will always show a net loss

c. Variable costing will always show a positive net income

d. Net income will be erratic under absorption costing

23. Red Co. had the same activity in 2021 as in 2020, except that production was higher in 2021 (vs. 2020). Red will show

a. Higher income in 2021 than in 2020

b. The same income in both years

c. The same income in both years under variable costing

d. The same income in both years under absorption costing

24. Violet Company manufactures a single product. Unit variable production costs are P 20 & fixed production costs are P

150,000. Violet uses a normal activity of 10,000 units to set its standard costs. Violet began the year with no inventory,

produced 11,000 units, & sold 10,500 units. What is the ending inventory under absorption costing?

a. P 10,000 c. P 17,500

b. P 15,000 d. P 20,000

25. A company's production facility has an ideal capacity of 12,500 units, which was used as the basis for the normal capacity

of 10,000 units. The company was able to produce 11,000 units during the period. Fixed manufacturing costs were P

200,000 while variable manufacturing costs were also P 200,000. What was the volume or capacity variance for the

production?

a. P 20,000 unfavorable c. P 24,000 favorable

b. P 20,000 favorable d. P 40,000 favorable

26. Super variable costing treats which of the following costs as the only variable and product costs?

a. Direct labor c. Straight-line depreciation of factory machine

b. Direct materials d. Supervisory salary of an assembly line manager

27. Super variable costing is sometimes referred to as

a. Full costing c. Indirect costing

b. GAAP costing d. Throughput costing

28. It is the expected market price for a product or service, considering the consumers' perception of value and the

competitors' responses.

a. Transfer price c. Cost-based price

b. Target price d. Selling price

29. Based on the following information: volume of production - 10,000 units; capital employed - P 60,000; cost to produce

and sell - P 5.00 per unit. The unit selling price that will yield a 20% return on investment is:

a. P 5.10 c. P 7.00

b. P 6.20 d. P 7.01

30. Magenta Company plans to introduce a new product. To compete effectively, the product could not be priced at more

than P30. The company requires a return on investment of 15% on all new products. The plan is to produce and sell

25,000 units a year. If the product requires a P 500,000 investment, then target cost should be:

a. P 27.00 c. P 21.50

b. P 23.00 d. P 20.00

31. Based on sales of 500 units per year, a new product has estimated traceable costs of P 990,000. What is the target

price to obtain a 15% profit margin on sales?

a. P 2,329 c. P 1,980

b. P 2,227 d. P 1,935

32. Cyan Co. signed a government construction contract providing for a formula price of actual cost plus 10%. In addition,

Cyan was to receive one-half of any savings resulting from the formula price being less than the target price of

P2,200,000. Cyan's actual costs incurred were P 1,920,000. How much should Cyan receive from the contract?

a. P 2,060,000 c. P 2,156,000

b. P 2,112,000 d. P 2,200,000

33. Fuchsia Sporting Company is introducing a new product. It priced the new product low enough to generate excitement.

Which one of the following pricing approaches did management implement?

a. Price skimming c. Cost-based pricing

b. Penetration pricing d. Market-based pricing

34. A manufacturing firm intentionally priced its product below cost to eliminate competition. It has a reasonable prospect

of recovering the resulting loss through higher prices once competition is eliminated or through a greater share in the

market. The manufacturing firm has engaged in

a. Price discrimination c. Collusive pricing

b. Predatory pricing d. Black market pricing

35. Functional discounts are offered to

a. Encourage large volume purchases {volume discount}

b. Encourage prompt payment, improve cash flows and avoid bad debts {cash discount}

c. Encourage sale and stabilize production of out-of-season products {seasonal discount}

d. Other members of the marketing channel for performing certain services, such as selling