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    QUIZ 1 Absorption Costing

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    John Carlo Cruz
    This document contains a quiz on absorption costing and variable costing concepts with 16 multiple choice questions. Some key points covered are: - Under absorption costing, fixed manufacturing overhead costs are indirect product costs, while under variable costing they are indirect period costs. - Absorption costing treats all costs, including fixed costs, as inventory costs, resulting in higher inventory costs than variable costing. - Variable costing income fluctuates with production levels, while absorption costing income is affected by both production and inventory levels. - Questions ask about determining costs, income, and variances under each method based on production and sales information for various companies.

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    QUIZ 1 Absorption Costing

    Uploaded by

    John Carlo Cruz
    2K views1 page
    This document contains a quiz on absorption costing and variable costing concepts with 16 multiple choice questions. Some key points covered are: - Under absorption costing, fixed manufacturing overhead costs are indirect product costs, while under variable costing they are indirect period costs. - Absorption costing treats all costs, including fixed costs, as inventory costs, resulting in higher inventory costs than variable costing. - Variable costing income fluctuates with production levels, while absorption costing income is affected by both production and inventory levels. - Questions ask about determining costs, income, and variances under each method based on production and sales information for various companies.

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    This document contains a quiz on absorption costing and variable costing concepts with 16 multiple choice questions. Some key points covered are: - Under absorption costing, fixed manufacturing overhead costs are indirect product costs, while under variable costing they are indirect period costs. - Absorption costing treats all costs, including fixed costs, as inventory costs, resulting in higher inventory costs than variable costing. - Variable costing income fluctuates with production levels, while absorption costing income is affected by both production and inventory levels. - Questions ask about determining costs, income, and variances under each method based on production and sales information for various companies.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    2K views1 page

    QUIZ 1 Absorption Costing

    Uploaded by

    John Carlo Cruz
    This document contains a quiz on absorption costing and variable costing concepts with 16 multiple choice questions. Some key points covered are: - Under absorption costing, fixed manufacturing overhead costs are indirect product costs, while under variable costing they are indirect period costs. - Absorption costing treats all costs, including fixed costs, as inventory costs, resulting in higher inventory costs than variable costing. - Variable costing income fluctuates with production levels, while absorption costing income is affected by both production and inventory levels. - Questions ask about determining costs, income, and variances under each method based on production and sales information for various companies.

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    You are on page 1of 1

    Management Advisory Services ACTG 7

    MAS MS-03: ABSORPTION & VARIABLE COSTING

    QUIZ #1 MIDTERM TOPIC


    1. Under absorption costing, fixed manufacturing overhead are best described as
    a. Direct product costs c. Direct period costs
    b. Indirect product costs d. Indirect period costs
    2. Under variable costing, fixed manufacturing overhead costs are best described as
    a. Direct period costs c. Direct product costs
    b. Indirect period costs d. Indirect product costs
    3. Under variable costing, all product costs are variable FALSE
    4. Absorption costing differs from variable costing in that
    a. Variable costing treats all variable costs as product costs.
    b. Variable costing treats selling costs as period costs
    c. Inventory cost is higher under absorption costing
    d. Profit is higher under absorption costing
    Items 5 to 7 are based on the following information
    White Company manufactures a single product. Unit variable production costs are P 20 and fixed production costs are
    P 150,000. White uses a normal activity of 10,000 units. White began the year with no inventory, produced 12,00 units and
    sold 7,500 units.
    5. Determine the unit product cost under variable costing
    a. P 20.00 c. P 35.00
    b. P 32. 50 d. P 40.00
    6. Determine the unit product cost under absorption costing
    a. P 20.00 c. P 35. 00
    b. P 32. 50 d. P 40.00
    7. Determine the capacity or volume variance under absorption costing
    a. P24,000 unfavorable c. P 30,000 unfavorable
    b. P 24,000 favorable d. P30,000 favorable
    NOTE: Capacity or volume variance = (actual production –normal production) x Unit FFOH
    8. There is no volume or capacity variance under variable costing. TRUE

    9. If production is higher than sales, then absorption costing income is expected to be


    a. Lower than variable costing income
    b. Higher than variable costing income
    c. Equal to the variable costing income
    d. Incomparable with variable costing income
    10. Black Company produced 10,000 units and sold 9,000 units. Fixed manufacturing overhead costs were P 20,000, and
    variable manufacturing costs were P 3 per unit. Which of the following best describes the net income under
    absorption costing method?
    a. P 2,000 more than net income under variable costing method
    b. P 5,00 more than net income under variable costing method
    c. P 2,000 less than net income under variable costing method
    d. P 5,00 less than net income under variable costing method
    11. Green Company has operating income of P 50,000 using direct costing for a given period. Beginning and ending
    inventories for that period were 13,000 units and 18,000 units, respectively. If the fixed factory overhead application
    rate is P 2 per unit, then what is the operating income using the absorption costing?
    a. P 70,000 c. P 50,000
    b. P 60,000 d. P 40,000
    12. Violet Company had 16,00 units in beginning inventory. During the year, the company’s variable production costs
    were P 6 per unit and its fixed manufacturing overhead costs were P 4 per unit. The company’s net income for the
    year was P 24, 000 lower under absorption costing that it was under variable costing.
    How many units does the company has in its ending inventory?
    a. 22, 000 units c. 6,000 units
    b. 10,000 units d. 4,000 units
    13. Pink Co. had a net income of P85,500 using variable costing and net income of P 90,000 using absorption costing.
    Total fixed manufacturing overhead was P 150,000 and production was 100,000 units.
    How did inventory level change during the year?
    a. 3,000 units increase c. P 3,000 units decrease
    b. 4,500 units increase d. 4,500 units decrease
    14. Under a just-in-time (JIT) production environment, income under absorption costing tends to be equal with income
    under variable costing. FALSE
    15. Variable costing income fluctuations with production and does not react to change in sales FALSE
    16. Variable costing is unacceptable for
    a. Financial reporting c. Transfer pricing
    b. Cost-volume-profit analysis d. Short-tem decision making.

    Page 1 of 1 MS-03

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