Variable Costing Theories Reviewer 5.

The costing method that treats all fixed costs as

Hulguin, Alyssa Isabel D. period costs is:
BSA - 2 a. absorption costing.
b. job-order costing.
1. Under variable costing, fixed manufacturing c. variable costing.
overhead is: d. process costing.
а. carried in a liability account.
b. carried in an asset account. 7. Under absorption costing, fixed factory
C. ignored. overhead costs:
d. immediately charged against sales as a period a. are deferred in inventory when production
cost. exceeds sales.
b. are always treated as period costs.
1. Which one of the following statements is true C. are released from inventory when production
for a firm that uses variable costing? exceeds sales,
a. The unit product cost changes because of D. none of these.
changes in the number of units manufactured.
b. Profit fluctuates with sales. 8. WB Company computes net income under both
c. Any underapplied overhead is calculated into the absorption costing approach and the variable
the product cost. costing approach. For a given year, the absorption
d. Product costs include variable administration costing net income was greater than the variable
costs. costing net income. This fact suggests that:
a. variable manufacturing cots were less than fixed
2. A principal difference between variable costing manufacturing costs
and absorption costing centers on: b. more units were produced during the year than
a. whether variable manufacturing costs should were sold.
be included as product costs. c. more units were sold during the year than were
b. whether fixed manufacturing costs should be produced.
included as product costs. d. common costs were greater than variable costs
C. whether fixed manufacturing costs and fixed for the year.
selling and administrative costs should be
included as product costs. 9. Net income computed using variable costing
c. none of these. would exceed net income computed using
absorption costing if:
3. Under variable costing: a. units sold exceed units produced.
a. net income will tend to move upward and b. units sold are less than units produced.
downward in response to changes in levels of c. units sold equal units produced.
production d. the unit fixed cost is zero
b. inventory costs will always be lower than under
absorption costing. 10. When sales are constant, but the production
C. net income will tend to vary inversely with level fluctuates, net income determined by the
production changes. absorption costing method will:
D. net income will always be higher than under а. tend to fluctuate in the same direction as
absorption costing. fluctuations in the level of production.
B. tend to remain constant.
4. - When sales are constant, but the production c. tend to fluctuate inversely with fluctuations in
level fluctuates, net income determined by the the level of production.
variable costing method will: d. none of these.
a. fluctuate in direct proportion to changes in
production. 11. Manga, Inc. manufactured 700 units last year.
b. remain constant. The ending inventory consisted of 100 units. There
D. fluctuate inversely with changes in production. was no beginning inventory. Variable
c. be greater than net income under absorption manufacturing costs were P6.00 per unit and fixed
costing manufacturing costs were P2.00 per unit. What
would be the change in the peso amount of
ending inventory if variable costing was used Solution
instead of absorption costing? 19,000 x 100 = 1,900,000
A. P800 decrease 19,000 x 40 = (760,000)
B. P200 decrease. 19,000 x 2 VSA = 38,000
C. P0 Fixed Manuf. OH 500,000
D. P200 increase Fixed S and A 600,000 (1,138,000)
Solution Variable Cost. Net Income 2,000
100 units x 6 = 600
100 units x 8 (6 + 2) = 800 14. Last year, Mayumi Company had income of
(200) P40,000 using variable costing. Beginning and
ending inventories were 22,000 and 27,000 units,
12. Variable production costs are P12 per unit and respectively. If the fixed manufacturing overhead
variable selling and administrative expenses are P3 cost was P3.00 per unit, what was the income
per unit. Fixed manufacturing overhead totals using absorption costing?
P36,000 and fixed selling and administration A. P15,000
expenses total P40,000. Assuming a beginning B. P25,000
inventory of zero, production of 4,000 units and C. P40,000
sales of 3,600 units, the peso value of the ending D. P55,000
inventory under variable costing would be:
а, P4,800. Solution
b. P8,400. Income 40,000
C. P6,000. Ending Inv. 27,000
d. P3,600. Beginning Inv. 22,000
5,000
Solution x OH Cost PU 3 15,000
Production 4,000 Income 55,000
Sales 3,600
400 15.The following data pertain to last year's
Multiplied by production cost operations at Lois, Incorporated:
per unit 12
4,800

13. The following data pertain to last year's

operations at HP Corp.:

What was the absorption costing net income last

year?
а. P44,000
b. P50,000
C. P48,000
What was the variable costing net income last D. P49,000
year?
A. P12,000 Solution
B. P57,000 98,000 x 10 (SPPU)= 980,000
C. P 2,000 98,000 x 7 (VCPU)= (686,000)
D. P27,000 294,000
98,000 x 2 (VSA)= 196,000
Fixed S and A= 50,000 246,000
48,000
Questions 16 through 19 refer to the following: Solution
Magic Company manufactures a single product. Units produced during the year 12,000
The following data pertain to the company's Units sold (10,000)
operations last year: 2,000
4
Net Income - AC 8,000

20. A company had a net income of P85,500 using

variable costing and a net income of P90,000 using
absorption costing. Total fixed manufacturing
overhead was P150,000, and production was
100,000 units. Between the beginning and the end
of the year, the inventory level:
16. Under variable costing, the unit product cost
is: a. increased by 4,000 units.
A. P 8.00. B. P10.00. b. increased by 3,000 units.
C.P12.00. D. P14.00. c. decreased by 4,500 units.
d. decreased by 3,000 units.
Answer is given (Variable Cost PU - Production)
Solution
17. 17. Under absorption costing, the unit product Net Income - AC 90,000
cost is: Net Income - VC 85,500
a. P 8.00. B. P10.00. 4,500
C. P12.00. D. P15.00. / 1.5
Inv. Level 3,000
Solution
FC - Production 48,000
/ Units Produced during the year 12,000
4
+ variable cost pu - production 8
Unit Product Cost 12

18. The net income under variable costing would

be:
а. P64,000. B. P60,000.
C.P56,000. D. P52,000.

Solution
10,000 x 24 = 240,000
10,000 x 8 = 80,000
10,000 x 2 = 20,000 (100,000)
140,000
FC - Production 48,000
FC - S and A 36,000 (84,000)
Net Income VC 56,000

19. The net income under absorption costing

would be: •
a. the same as the income under variable costing.
b. ' P8,000 greater than the income under variable
costing.
c. P12,000 greater than the income under variable
costing.
d. P8,000 less than the income under variable
costing.