SUBJECT: PRODUCT COSTING

1.Which method of inventory costing treats direct manufacturing costs and manufacturing overhead costs, both variable and fixed, as inventoriable costs?

Direct costing

Variable costing

Absorption costing

Conversion costing

2.What is the costing method that treats all fixed costs as period costs?

Absorption costing

Job-order costing

Variable costing

Process costing

3.Use the following information for the next two (2) questions: For P1,000 per box, Sisi, Inc. produces and sells delicacies. Direct materials are P400 per box and direct manufacturing labor averages P75 per box. Variable overhead is P25 per box and fixed overhead cost 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 absorption costing?

500

625

670

770

4.What is the inventoriable cost per box using variable costing?

770

670

625

500

5.Under variable costing,

A. Net income will tend to move based on changes in levels of production

B. Inventory costs will always be lower than under absorption costing

C. Net income will always be higher than under absorption costing

D. Net income will tend to vary inversely with production changes

6.Income under absorption costing may differ from income under variable costing. How is this difference calculated?

A. Change in the quantity of units in inventory times the fixed factory overhead rate per unit.

B. Number of units produced during the period times the fixed factory overhead rate per unit.

C. Change in the quantity of units in inventory times the variable manufacturing cost per unit.

D. Number of units produced during the period times the variable manufacturing cost per unit.

7.Blonde, Inc. manufactured 7,000 units last year. The ending inventory consisted of 100 units. There was no beginning inventory. Variable manufacturing costs were P6.00 per unit and fixed manufacturing costs were P2.00 per unit. What would be the change in the peso amount of ending inventory if variable costing was used instead of absorption costing?

800 decrease

200 increase

0-

200 decrease

8.When production exceeds sales, fixed manufacturing overhead costs

A. Are released from inventory under absorption costing

B. Are deferred in inventor under absorption costing

C. Are released from inventory under variable costing

D. Are deferred in inventory under variable costing

9.Lavender Company's income under absorption costing was P3,600 lower than its income under variable costing. The company sold 10,000 units during the year, and its variable costs were P9 per unit, P1 of which represents the variable selling expense. If production cost was P11 per unit absorption costing, then how many units did the company produce during the year?

8,200 units

8,200 units

11,200 units

11,800 units

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

Beginning inventories

Ending inventories

Variable costs

Beginning and ending inventories