MNO Products, Inc. planned and actually manufactured 200,000 units of its single product in 2000, its first year of operations. Variable manufacturing costs were P30 per unit of product. Planned and actual fixed manufacturing costs were P600,000, and marketing and administrative costs totaled P400,000 in 2000. MNO sold 120,000 units of product in 2000 at a selling price of P40 per unit. What is the cost of the ending inventory assuming variable costing is used?
A. P2,400,000 B. P2,750,000 C. P2,250,000 D. P2,640,000
2. LY &
Company completed its first year of operations during which time the following
information were generated:
|
Total units
produced
|
|
100,000
|
|
Total units
sold @ P100 per unit
|
|
80,000
|
|
Work in
process ending inventory
|
|
20,000
|
|
Costs
|
Variable
Cost per Unit
|
Fixed
Costs
|
|
Raw materials
|
P20.00
|
|
|
Direct labor
|
12.50
|
|
|
Factory overhead
|
7.50
|
P1.2
million
|
|
Selling and administrative
|
10.00
|
0.7
million
|
If the company used variable (direct) costing method, the operating
income would be
A. P2,100,000 B. P4,000,000c. C. P2,480,000 D. P3,040,000
3. West Co.’s 1988 manufacturing costs were as follows:
Direct materials and direct labor $700,000
Other variable manufacturing costs 100,000
Depreciation of factory building and manufacturing equipment 80,000
Other fixed manufacturing overhead 18,000
What amount should be considered
product cost for external reporting purposes?
A. $700,000 B. $800,000 C. $880,000 D. $898,000
4. The total production cost for 20,000 units was P21,000 and the total production cost for making 50,000 units was P34,000. Once production exceeds 25,000 units, additional fixed costs of P4,000 were incurred. The full production cost per unit for making 30,000 units is:
A. P0.30 B. P0.68 C. P0.84 D. P0.93
5. At the end of Killo Co.’s first year of operations, 1,000 units of inventory remained on hand. Variable and fixed manufacturing cost per unit were $90 and $20, respectively. If Killo uses absorption costing rather than direct (variable) costing, the result would be a higher pretax income of
A. $20,000. B. $70,000. C. $0. D. $90,000.
6. Coomber Industries manufactures a single product using standard costing. Variable production costs are $13 and fixed production costs are $125,000. Coomber uses a normal activity of 12,500 units to set its standard costs. Coomber began the year with 1,000 units in inventory, produced 11,000 units, and sold 11,500 units. The standard cost of goods sold under absorption costing would be
A. $115,000 B. $149,500 C. $253,000 D. $264,500
7. Z Corp. incurred the following costs in 2001
(its first year of operations) based on production of 10,000 units:
Direct material $5
per unit
Direct labor $3
per unit
Variable product costs $2
per unit
Fixed product costs (in total) $100,000
When Z Corp. prepared its 2001
financial statements, its Cost of Goods Sold was listed at $100,000. Based on
this information, which of the following statements must be true:
A. Z Corp. sold all 10,000 units that it produced.
B. Z
Corp. sold 5,000 units.
C. Z Corp. had a very profitable year.
D. From the information given, one cannot tell whether Z Corp.'s
financial statements were prepared based on variable or absorption costing.
8. The Blue
Company has failed to reach its planned activity level during its first 2 years
of operation. The following table shows
the relationship among units produced, sales, and normal activity for these
years and the projected relationship for Year 3. All prices and costs have remained the same
for the last 2 years and are expected to do so in Year 3. Income has been positive in both Year 1 and
Year 2.
|
|
Units
Produced
|
Sales
|
Planned
Activity
|
|
Year 1
|
90,000
|
90,000
|
100,000
|
|
Year 2
|
95,000
|
95,000
|
100,000
|
|
Year 3
|
90,000
|
90,000
|
100,000
|
Because Blue Company uses an
absorption-costing system, gross margin for year 3 should be
A. Greater than Year 1. C. Equal to Year 1.
B. Greater than Year 2. D. Equal to Year 2.
9. Fleet, Inc. manufactured 700 units of Product A, a new product, during the year. Product A’s variable and fixed manufacturing costs per unit were $6.00 and $2.00 respectively. The inventory of Product A on December 31, consisted of 100 units. There was no inventory of Product A on January 1. What would be the change in the dollar amount of inventory on December 31 if variable costing were used instead of absorption costing?
A. $800 decrease. B. $200 decrease. C. $0 D. $200 increase.
10. GHI Company had P100,000 income using absorption costing. GHI has no variable manufacturing costs. Beginning inventory was P5,000 and ending inventory was P12,000. What is the income under variable costing?
A. P100,000. B. P107,000 C. P88,000 D. P93,000
11. Don Juan Ltd. Manufactures a single product for which the costs and selling prices are:
Variable production costs P 50 per unit
Selling price¶ P125
per unit
Fixed production overhead P200,000
per quarter
Fixed selling and administrative overhead P80,000 per quarter
Normal capacity 20,000
units per quarter
Production in first quarter was 19,000 units and sales volume was 16,000
units. No opening inventory for the
quarter.
The absorption costing profit for the quarter was
A. P920,000 B. P950,000 C. P960,000 D. P970,000
What's the solution for these problems?
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