12. Youthful Biscuits manufactures and sells boxed coconut cookies. The biggest market for these cookies are as gifts that college students buy for their business teachers. There are 100 cookies per box. The following income statement shows the result of the first year of operations. This statement was the one included in the company’s annual report to the stockholders.
|
Sales (400
boxes at P12.50 a box)
|
P5,000.00
|
|
Less: Cost of goods sold (400 boxes at P8 per
box)
|
3,200.00
|
|
Gross margin
|
1,800.00
|
|
Less: Selling and administrative expenses
|
800.00
|
|
Net income
|
1,000.00
|
Variable selling
and administrative expenses are P0.90 per box sold. The company produced 500 boxes during the
year. Variable manufacturing costs are
P5.25 per box and fixed manufacturing overhead costs total P1,375 for the year.
What is the company’s direct
costing net income?
A. P2,540 B. P2,265 C. P1,000 D. P 725
13. During its first year of operations, a company produced 275,000 units and sold 250,000 units. The following costs were incurred during the year:
|
|
Variable
Cost per Unit
|
Fixed
Costs
|
|
Direct
materials
|
$15.00
|
|
|
Direct
labor
|
10.00
|
|
|
Manufacturing
overhead
|
12.50
|
$2,200,000
|
|
Selling and
administrative
|
2.50
|
1,375,000
|
The difference between operating income calculated on the
absorption-costing basis and on the variable costing basis is that
absorption-costing operating income is
A. $200,000 greater. B. $220,000 greater. C. $325,000
greater. D. $62,500 lesser.
14. A company has the following cost data:
Fixed manufacturing costs $2,000
Fixed selling, general, and administrative
costs 1,000
Variable selling costs per unit sold 1
Variable manufacturing costs per unit 2
Beginning inventory 0
units
Production 100
units
Sales 90units
at $40 per unit
Variable and
absorption-cost net incomes are:
A. $320 variable, $520 absorption C. $520 variable, $320 absorption
B. $330 variable, $530 absorption D. $530 variable, $330 absorption
15. A company manufactures 50,000 units of a product and sells 40,000 units. Total manufacturing cost per unit is $50 (variable manufacturing cost, $10; fixed manufacturing cost, $40). Assuming no beginning inventory, the effect on net income if absorption costing is used instead of variable costing is that:
A. net income is $400,000 lower C. net income is the same
B. net income is $400,000 higher D. net income is $200,000 higher
16. A company had an income of P50,000 using direct costing for a given month. Beginning and ending inventories for the month are 13,000 units and 18,000 units, respectively. Ignoring income tax, if the fixed overhead application rate was P2 per unit, what was the income using absorption costing?
A. P40,000 B. P50,000 C. P60,000 D. P70,000
Questions 17 through 19 are based on the following
information.
The following information is available for X Co. for its first year of operations:
Sales in units 5,000
Production in units 8,000
Manufacturing costs:
Direct labor $3
per unit
Direct material 5
per unit
Variable overhead 1
per unit
Fixed overhead $100,000
Net income (absorption method) $30,000
Sales price per unit $40
17. What would X Co. have reported as its income before income taxes if it had used variable costing?
A. $30,000 B. ($7,500) C. $67,500 D. ($30,000)
18. What was the total amount of SG&A expense
incurred by X Co.?
A. $30,000 B. $62,500 C. $6,000 D. $36,000
19. Based on variable costing, what would X Co.
show as the value of its ending inventory?
A. $120,000 B. $64,500 C. $27,000 D. $24,000
Questions 20
through 23 are based on the following information.
The annual flexible budget below was prepared for use in making decisions relations to Product X.
|
|
100,000
units
|
150,000
units
|
200,000
units
|
|
Sales
volume
|
$
800,000
|
$1,200,000
|
$1,600,000
|
|
Manufacturing
costs:
|
|
|
|
|
Variable
|
$300,000
|
$450,000
|
$600,000
|
|
Fixed
|
200,000
|
200,000
|
200,000
|
|
|
$500,000
|
$650,000
|
$800,000
|
|
Selling
& other expenses
|
|
|
|
|
Variable
|
$200,000
|
$300,000
|
$400,000
|
|
Fixed
|
160,000
|
160,000
|
160,000
|
|
|
$360,000
|
$460,000
|
$560,000
|
|
Income (or
loss)
|
$(60,000)
|
$90000
|
$240,000
|
The 200,000
unit budget has been adopted and will be used for allocating fixed
manufacturing costs to units of Product X.
At the end of the first 6 months, the following information is
available:
Units
Production completed 120,000
Sales 60,000
All fixed costs are budgeted
and incurred uniformly throughout the year, and all costs incurred coincide
with the budget. Over- and under-applied
fixed manufacturing costs are deferred until year-end. Annual sales have the following seasonal
pattern.
Portion of Annual Sales |
|
|
First
quarter
|
10%
|
|
Second
quarter
|
20%
|
|
Third quarter
|
30%
|
|
Fourth
quarter
|
40%
|
20. The amount of fixed factory costs applied to product during the first 6 months under absorption costing is
A. Over-applied by $20,000. C. Under-applied by $40,000.
B. Equal
to the fixed costs incurred. D. Under-applied by $80,000.
21. Reported net income (or loss) for the first 6 months under absorption costing is
A. $160,000 B. $0 C. $40,000 D. $(40,000)
22. Reported net income (or loss) for the first 6 months under variable costing is
A. $180,000 B. $40,000 C. $0 D. $(180,000)
23. Assuming
that 90,000 units of Product X were sold during the first 6 months and that
this is to be used as a basis, the revised budget estimate for the total number
of units to be sold during this year is
A. 360,000 B. 240,000 C. 200,000 D. None of the above
Questions 24 through 29 are based on
the following information.
Valyn Corporation employs an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding Valyn’s planned and actual operations for the 1995 calendar year are presented below.
|
|
Planned Activity
|
Actual Activity
|
|
Beginning finished goods inventory
in units
|
35,000
|
35,000
|
|
Sales in units
|
140,000
|
125,000
|
|
Production in units
|
140,000
|
130,000
|
The planned per
unit cost figures shown in the next schedule were based on the estimated
production and sale of 140,000 units in 1995. Valyn uses a predetermined manufacturing overhead rate for applying
manufacturing overhead to its product.
Thus, a combined manufacturing overhead rate of $9.00 per unit was
employed for absorption costing purposes in1995. Any over- or under-applied manufacturing
overhead is closed to the cost of goods sold account at the end of the
reporting year.
|
|
Planned Cost
|
Incurred
|
|
|
|
Per Unit
|
Total
|
Costs
|
|
Direct materials
|
$12.00
|
$1,680,000
|
$1,560,000
|
|
Direct labor
|
9.00
|
1,260,000
|
1,170,000
|
|
Variable manufacturing overhead
|
4.00
|
560,000
|
520,000
|
|
Fixed manufacturing overhead
|
5.00
|
700,000
|
715,000
|
|
Variable selling expenses
|
8.00
|
1,120,000
|
1,000,000
|
|
Fixed selling expenses
|
7.00
|
980,000
|
980,000
|
|
Variable administrative expenses
|
2.00
|
280,000
|
250,000
|
|
Fixed administrative expenses
|
3.00
|
420,000
|
425,000
|
|
Total
|
$50.00
|
$7,000,000
|
$6,620,000
|
The 1995 beginning finished goods
inventory for absorption costing purposes was valued at the 1994 planned unit
manufacturing cost, which was the same as the 1995 planned unit manufacturing
cost. There are no work-in-process
inventories at either the beginning or the end of the year. The planned and actual unit selling price for
1995 was $70.00 per unit.
24. The value of Valyn Corporation’s 1995 actual
ending finished goods inventory on the absorption costing bases was
A. $900,000 B. $1,200,000 C. $1,220,000 D. $1,350,000
25. The value of Valyn Corporation’s 1995 actual ending
finished goods inventory on the variable costing basis was
A. $1,400,000. B. $1,125,000. C. $1,000,000. D. $750,000
26. Valyn Corporation’s total fixed costs expensed
in 1995 on the absorption costing bases were
A. $2,095,000 B. $2,120,000 C. $2,055,000 D. $2,030,000
27. Valyn Corporation’s actual manufacturing
contribution margin for 1995 calculated on the variable costing basis was
A. $4,375,000 B. $4,935,000 C. $4,910,000 D. $5,625,000.
28. The total variable costs expensed in 1995 by
Valyn Corporation on the variable costing basis was
A. $4,375,000 B. $4,500,000 C. $4,325,000 D. $4,550,000
29. The difference between Valyn Corporation’s 1995
operating income calculated on the absorption costing basis and calculated on
the variable costing basis was
A. $65,000 B. $25,000 C. $40,000 D. $90,000
Questions 30
through 35 are based on the following information.
Louder Industries manufactures a single product. Variable production costs are $20 and fixed production costs are $150,000. Louder uses a normal activity of 10,000 units to set its standard costs. Louder began the year with no inventory, produced 11,000 units, and sold 10,500 units.
30. Ending
inventory under variable costing would be
A. $10,000 B. $15,000 C. $17,500 D. $20,000
31. Ending
inventory under absorption costing would be
A. $10,000 B. $15,000 C. $17,500 D. $20,000
32. The volume
variance under variable costing would be
A. $0 B. $10,000 C. $15,000 D. Some other number.
33. The volume
variance under absorption costing would be
A. $0 B. $10,000 C. $15,000 D. Some other number.
34. The
standard cost of goods sold under variable costing would be
A. $200,000 B. $210,000 C. $367,500 D. Some other number.
35. The
standard cost of goods sold under absorption costing would be
A. $200,000 B. $210,000 C. $367,500 D. Some other number.
36. In the ABC Company, sales are P800,000, cost of goods under absorption costing is P600,000, and total operating expenses are P120,000. If cost of goods sold is 70% variable and total operating expenses are 60% fixed, what is the contribution margin under variable costing?
A. P332,000. B. P308,000. C. P260,000. D. P380,000.
37. A company manufactures a single product for its customers by contracting in advance of production. Thus, the company produces only units that will be sold by the end of each period. For the last period, the following data were available:
Sales $40,000
Direct materials 9,050
Direct labor 6,050
Rent (9/10 factory, 1/10 office) 3,000
Depreciation on factory equipment 2,000
Supervision (2/3 factory, 1/3 office) 1,500
Salespeople’s salaries 1,300
Insurance (2/3 factory, 1/3 office) 1,200
Office supplies 750
Advertising 700
Depreciation on office equipment 500
Interest on loan 300
The gross profit margin percentage (rounded) was
A. 34% B. 41% C. 44% D. 46%
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