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Chapter 5 MAS

1. The document provides sample test questions and problems related to absorption costing and variable costing accounting methods. 2. It includes multiple choice, true/false, and problems questions calculating unit costs, income statements, and ending inventory values using both absorption and variable costing. 3. The problems provide data on unit production, sales, costs, and inventory for a company and ask students to apply absorption and variable costing to calculate financial results under different sales scenarios.

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Demie dems
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2K views3 pages

Chapter 5 MAS

1. The document provides sample test questions and problems related to absorption costing and variable costing accounting methods. 2. It includes multiple choice, true/false, and problems questions calculating unit costs, income statements, and ending inventory values using both absorption and variable costing. 3. The problems provide data on unit production, sales, costs, and inventory for a company and ask students to apply absorption and variable costing to calculate financial results under different sales scenarios.

Uploaded by

Demie dems
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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UNIVERSITY OF CEBU-MAIN

COLLEGE OF BSBA AND ACCOUNTANCY


ACCTG 120D: CHAPTER 5

NAME: Mendez, Demie Franz B. DATE: October 10, 2020


COURSE AND YEAR: BSMA - 3

TEST I: MULTIPLE CHOICE. Encircle the letter of the best answer.


1. In absorption costing, as contrasted with direct costing, the following are absorbed into inventory.
ⓐ 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 costs?


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

3. If production is greater than sales (units), then absorption costing net income will generally be
ⓐ greater than 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

4. 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
ⓑ 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 income is lower than absorption
costing net income

5. In an income statement prepared as an internal report using the direct (variable) costing method,
fixed selling and administrative expenses would
a. Not be used
b. Be used in the computation of the contribution margin
ⓒ Be used in the computation of operating income but not in the computation of the contribution
margin
d. Be treated the same as variable selling and administrative expense

TEST II. TRUE OR FALSE


TRUE 1. In an income statement prepared as an internal report using the variable costing method,
variable selling and administrative expense would be used in the computation of the contribution
margin
TRUE 2. Direct costing and variable costing are different terms that mean the same thing
TRUE 3. In a variable costing income statement, sales revenue is typically lower than in absorption
costing income statement
FALSE 4. Product costs, also called inventoriable costs or deferrable costs, are charged outright as
expenses, regardless of whether the units are sold or unsold
FALSE 5. The difference between absorption and variable costing methods lies on how the variable
overhead is treated.
TEST III. PROBLEMS
A. Northern Bicycle produces an inexpensive motorbike that sells for P12,000. Selected data for the
company’s operations last year follow:
Units in beginning inventory 300
Units produced 1,000
Variable costs per unit:
Direct materials P1,200
Direct labor 1,400
Manufacturing overhead 500
Selling and administrative 200
Fixed costs per year:
Manufacturing overhead P4,000,000
Selling and administrative 2,000,000

Case A: Assuming that the units sold totals 800 units.


1. Compute the unit costs under absorption and variable costing methods
ABSORPTION COSTING VARIABLE COSTING
DIRECT MATERIALS P 1,200 P 1,200
DIRECT LABOR 1,400 1,400
VARIABLE MANUFACTURING 500 500
OVERHED
FIXED MANUFACTURING 4,000 -------
OVERHEAD
UNIT COST P 7,100 P 3,100
Solution:
Fixed manufacturing overhead: 4,000,000/1000 = 4000

2. Prepare the income statement under absorption and variable costing methods
ABSORPTION COSTING
Sales (800 x 12,000) P 9,600,000
COGS (800 x 7,100) (5,680,000)
Gross Profit 3,920,000
OPEX (Var. (200 x 800) = 160,000 + Fixed – 2,000,000) (2,160,000)
Net Income P 1,760,000

VARIABLE COSTING
Sales (800 x 12,000) P 9,600,000
Variable Cost – (Mftg. (800 x 3100) = 2,480,000 + S&A (200 x 800) = 160,000) (2,640,000)
Contribution Margin 6,960,000
Fixed Cost (Mftg. – 4,000,000 + S&A – 2,000,000) (6,000,000)
Net Income P 960,000

Compute the value of ending inventory under absorption and variable costing methods
Beginning Inventory 300 Absorption Costing Variable Costing
Production 1000
1300 Ending 500 x 7,100 500 x 3,100
= 3,550,000 = 1,550,000
Sales (800) Inventory
Ending Inventory 500

*increase of 200 in ending inventory


4. Reconcile the difference in operating income under the absorption and variable costing methods
Variable Costing Net Income 960,000
Add: 200 x 4,000 800,000
Absorption Net Income 1,760,000

Case B: Assuming that the units sold totals 1,100 units.


5. Prepare the income statement under absorption and variable costing methods
ABSORPTION COSTING
Sales (1,100 x 12,000) P 13,200,000
COGS (1,100 x 7,100) (7,810,000)
Gross Profit 5,390,000
OPEX (Var. (200 x 1,100) = 220,000 + Fixed – 2,000,000) (2,220,000)
Net Income P 3,170,000

VARIABLE COSTING
Sales (1,100 x 12,000) P 13,200,000
Variable Cost – (Mftg. (1,100 x 3100) = 3,410,000 + S&A (200 x 1,100) = 220,000) (3,630,000)
Contribution Margin 9,570,000
Fixed Cost (Mftg. – 4,000,000 + S&A – 2,000,000) (6,000,000)
Net Income P 3,570,000

6. Compute the value of ending inventory under absorption and variable costing methods
Beginning Inventory 300 Absorption Costing Variable Costing
Production 1000
Ending 200 x 7,100 200 x 3,100
1300
= 1,420,000 = 620,000
Sales (1100) Inventory
Ending Inventory 200

*decrease of 100 in ending inventory


7. Reconcile the difference in operating income under the absorption and variable costing methods
Variable Costing Net Income 3,570,000
Less: 100 x 4,000 400,000
Absorption Net Income 3,170,000

Case C: Assuming that the units sold totals 1,000 units


8. Prepare the income statement under absorption and variable costing methods
ABSORPTION COSTING
Sales (1,000 x 12,000) P 12,000,000
COGS (1,000 x 7,100) (7,100,000)
Gross Profit 4,900,000
OPEX (Var. (200 x 1,000) = 200,000 + Fixed – 2,000,000) (2,200,000)
Net Income P 2,700,000

VARIABLE COSTING
Sales (1,000 x 12,000) P 12,000,000
Variable Cost (Mftg. (1,000 x 3100) = 3,100,000 + S&A (200 x 1,000) = 200,000) (3,300,000)
Contribution Margin 8,700,000
Fixed Cost (Mftg. – 4,000,000 + S&A – 2,000,000) (6,000,000)
Net Income P 2,700,000

9. Compute the value of ending inventory under absorption and variable costing methods
Beginning Inventory 300
Production 1000 Absorption Costing Variable Costing
1300 Ending 300 x 7,100 300 x 3,100
Sales (1000) = 2,130,000 = 930,000
Ending Inventory 300
Inventory

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