SUBJECT: PRODUCT COSTING

1.Which one of the following statements is correct regarding absorption costing and variable costing?

A. Overhead costs are treated in the same manner under both costing methods

B. If finished goods inventory increases, absorption costing results in higher income

C. Variable manufacturing costs are lower under variable costing

D. Gross margins are the same under both costing methods

2.Red Company had the same activity in 2021 as in 2020 except that production was higher in 2021 than in 2020. Red will show

A. Higher income in 2021 than 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

3.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 cost

4.Which of the following statements is true for a firm that uses variable costing?

A. The cost of a unit of product changes because of change in number of units manufactured

B. Profit fluctuates with sales

C. An idle facility variation is calculated

D. Product costs include variable administrative costs

5.Violet Company manufactures a single product. Unit variable production costs are P20 and fixed production costs are P150,000. 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 and sold 10,500 units. What is the ending inventory under absorption costing?

10,000

15,000

17,500

20,000

6.Use the following information for the next two (2) questions: Huns Company's 2021 fixed manufacturing overhead costs totaled P120,000 and variable selling costs totaled P45,000. Under variable costing, how much of the costs are product costs?

0

45,000

120,000

165,000

7.Under absorption costing, how much of the costs are period costs?

0

45,000

120,000

165,000

8.Use the following information for the next two (2) questions: Gloc Company produces and sells delicacies. Direct materials regarding production amounted to P240 per unit. Direct labor was estimated to be P45 per unit and variable manufacturing expenses are expected to be P15 per unit. Fixed factory overhead amounted to a total of P5,000,000. Fixed administrative expenses amounted to a total of P1,800,000 per year with sales commissions of P60 per unit. For the year just ended, out of the 100,000 produced, only 60,000 units were sold Determine the inventoriable cost per unit using absorption costing

300

350

368

383

9.Determine the inventoriable cost per unit using variable costing

300

350

368

383

10.Gale Company's income under absorption costing was P120,000 lower than its income under variable costing. The company sold 22,400 units during the year, and its variable costs were P210 per unit, P24 of which represents the variable selling expenses. Production costs was P250 per unit under absorption costing. How many units did the company produce during the year?

20,525 units

24,275 units

22,400 units

21,200 units