Aklan Catholic College

Archbishop Gabriel M. Reyes St.

5600 Kalibo, Aklan, Philippines
Tel. Nos.: (036)268-4152; 268-9171
Fax No.: (036)268-4010
Website: http://www.acc.edu.ph
E-mail Add: [email protected]

MANAGEMENT ADVISORY SERVICES VARIABLE COSTING

1. 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.

2. Under the direct costing, which is classified as product cost?

a. Only variable production cost c. All variable costs
b. Only direct cost d. All variable and fixed production cost

3. When all manufacturing cost used in production are attached to the products, whether direct, or
indirect, variable or fixed, this is called:
a. Process costing c. Variable costing
b. Absorption costing d. Job Order costing

4. TEZ Company has the following manufacturing costs for the month at a production level of 1,000 units:
direct materials - P18,000, direct labor - P12,000, variable FOH - P8,000, fixed FOH – P6,000. Under
the usual costing system, how much should be considered as cost of sales if 900 units were sold?
a. P44,000 c. P38,000
b. P39,600 d. P34,200

5. Based on the data given in no. 4, how much should be considered as ending inventory if 900 units
were sold and using the usual costing system?
a. P6,000 c. P4,400
b. P5,200 d. P3,800

6. LUNA Company has the following manufacturing costs for the month at a production level of 1,000
units: direct materials - P18,000, direct labor - P12,000, variable FOH - P8,000, fixed FOH – P6,000.
Under the variable costing system, how much should be considered as cost of sales if 900 units were
sold?
a. P44,000 c. P38,000
b. P39,600 d. P34,200

7. Based on the data given in no. 6, how much should be considered as ending inventory if 900 units
were sold and using variable costing system?
a. P6,000 c. P4,400
b. P5,200 d. P3,800

8. AU Company has the following manufacturing costs for the month at a production level of 1,000 units:
direct materials - P18,000, direct labor - P12,000, variable FOH - P8,000, fixed FOH – P6,000. Under
the absorption costing system, how much should be considered as product cost per unit?
a. P44.00 c. P49.40
b. P39.60 d. P53.90

9. Using the data given in problem no. 8, how much should be considered as product cost using variable
costing system?
a. P44.00 c. P43.40
b. P38.00 d. P49.40

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10. LOPEZ Corp has the following manufacturing costs for the month at a production level of 1,000 units:
direct materials - P18,000, direct labor - P12,000, variable FOH - P8,000, fixed FOH – P6,000. Sales
amounted to P45,000. For selling expenses, the 450 units sold include the following, variable P5,4000
and fixed P4.500. Under absorption costing, how much should be the company’s net income?
a. P19,800 c. P12,000
b. P15,300 d. P 1,000

11. Based on the information given in no. 10, how much should be the company’s net income using
variable costing system?
a. P17,100 c. P12,000
b. P15,300 d. P 1,000

12. If production is greater that sales (units), then absorption costing net income will generally be
a. greater that direct costing net income.
b. less than direct costing net income.
c. equal to direct costing net income.
d. additional data is needed to be able to answer.

13. Which of the following statements is correct?

a. When production is higher than sales, absorption costing net income is lower than variable
costing net income.
b. If all the products manufactured during the period are sold in that period, variable costing net
income is equal to absorption costing net income.
c. When production is lower than sales, variable costing net income is lower than absorption
costing net income.
d. When production and sales level are equal, variable costing net is lower than absorption costing
net income.

14. With a production of 200,000 units of a product A during the month of June, Marion corporation has
incurred costs as follows:

Direct materials P200,000

Direct labor used 135,000
Manufacturing overhead:
Variable 75,000
Fixed 90,000
Selling and administrative expenses:
Variable 30,000
Fixed 85,000
Total P615,000

Under the absorption costing, the unit cost of product A was:

a. P2.20 c. P3.25
b. P2.50 d. P2.05

15. Gregoria Company began its operation on January 1, 2024 and produces a single product that sells for
P10 per unit. Gregoria uses an actual (historical) cost system. In 2024, 100,000 units were produced,
and 80,000 units were sold. There was no work-in-process inventory at December 31, 2024.
Manufacturing costs and selling and administrative expenses for 2024 were as follows:

Fixed costs Variable costs

Raw Materials - P2.00/unit produced
Direct Labor - P1.25/unit produced
Factory overhead P120,000 P0.75/unit produced
Selling and Admin P 70,000 P1.00/unit produced

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 What would be Gregoria’s operating income for 2024 under the variable (direct) costing method?
a. P114,000 c. P234,000
b. P190,000 d. P330,000

Question 16 and 17 are based on the following information. Expected to operate at normal capacity,
Golden Corporation plans to manufacture 275,000 units of products in 2024, and the following
estimates with respect to sales:

Sales in units 250,000

Unit selling price P 35.00

Finished goods inventory on December 31, 2023 is estimated at 25,000 units costing P500,000.
Included in this amount is the fixed manufacturing overhead amounting to P300,000. No changes in
both the fixed manufacturing cost and the variable cost per unit of produce are expected in 2024.

16. What is the estimated income from manufacturing using the absorption costing method?
a. P3,750,000 c. P3,550,000
b. P3,450,000 d. P3,850,000

17. What is the estimated income from manufacturing using the variable costing method?
a. P3,150,000 c. P3,450,000
b. P3,550,000 d. P3,750,000

18. The following operating data are available from the records of Mae Company for the month of January
2024:

Sales (P70 per unit) P210,000

Direct materials 59,200
Direct labor 48,000
Manufacturing overhead:
Fixed 36,080
Variable 24,000
Marketing and general expenses:
Fixed 11,000
Variable 5% of sales
Production in units – 3,280
Beginning Inventory – none

The net income for the month under the variable costing method would be
a. P32,420 c. P23,320
b. P25,500 d. P22,400

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