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Variable & Absorption Costing Bobadilla

Strategic Cost Management (University of Baguio)

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THEORY C.​ all product costs are variable.

Variable costing D.​ product costs are both fixed and variable.
1.​ To apply direct costing method it is necessary that you know 6.​ Cay Co.’s 1995 fixed manufacturing overhead costs totaled $100,000, and variable selling
A.​ Variable and fixed cost related to production costs totaled $80,000. Under variable costing, how should those costs be classified?
B.​ Controllable and uncontrollable cost of production A. B. C. D.
C.​ Contribution margin and break even point in production Period Costs $0 $ 80,000 $100,000 $180,000
D.​ Standard production rate and times of production elements Product Costs $180,000 $100,000 $ 80,000 $0

2.​ The following statements about the adoption of variable costing are true, except: 7.​ Under the variable-costing concept, unit product cost would most likely be increased by
A.​ A direct cost may not become a product cost. A.​ A decrease in the number of units produced.
B.​ An indirect cost may be assigned as part of product cost. B.​ An increase in the commission paid to salesman for each unit sold.
C.​ It is an acceptable method for general reporting purposes. C.​ A decrease in the remaining useful life of factory machinery depreciated on the
D.​ All fixed manufacturing costs are recognized as period costs. units-of-production method.
D.​ An increase in the remaining useful life of factory machinery depreciated on the
3.​ Which of the following is NOT an advantage of using variable costing for internal reporting sum-of-the-year’s digits method.
purposes?
A. ​ The impact of fixed costs on profits is emphasized. 8.​ Calculating income under variable costing does NOT require knowing
B. ​ Total costs may be overlooked when evaluating profits. A. ​ selling price.​ C. ​ unit sales.
C. ​ Profits are directly influenced by changes in sales volume. B. ​ unit production.​ D. ​ unit variable manufacturing costs.
D. ​ Fixed costs are reported at incurred values, not absorbed values, thus improving control
over those costs. 9.​ Which of the following statements is true for a firm that uses variable costing?
A.​ Profits fluctuate with sales.
4.​ A criticism of variable costing for managerial accounting purposes is that it B.​ An idle facility variation is calculated.
A. ​ overstates inventories. C.​ Product costs include variable administrative costs.
B. ​ does not reflect cost-volume-profit relationships. D.​ The cost of a unit of product changes because of changes in number of units
C. ​ is not acceptable for product line segmented reporting. manufactured.
D. ​ might encourage managers to emphasize the short term at the expense of the long term.
5.​ Under variable costing, 10.​ The change in period-to-period operating income when using variable costing can be
A.​ all product costs are fixed. explained by the change in the
B.​ all period costs are variable. A. ​ Unit sales level multiplied by the unit sales price.

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B. ​ Unit sales level multiplied by a constant unit contribution margin. C.​ variable overhead costs not allocated to units produced.
C. ​ Finished goods inventory level multiplied by the unit sales price. D.​ fixed manufacturing costs not allocated to units produced.
D. ​ Finished goods inventory level multiplied by a constant unit contribution margin.
16.​ When a firm prepares financial reports by using absorption costing
Absorption costing A.​ Profits will always increase with increases in sales.
11.​ All of the following are names for the product costing method in which both fixed and variable B.​ Profits will always decrease with decreases in sales.
costs are included in overhead rates, except: C.​ Decreased output and constant sales result in increased profits.
A.​ absorption costing​ C.​ direct costing D.​ Profits may decrease with increased sales even if there is no change in selling prices and
B.​ conventional costing​ D.​ full costing costs.

12.​ Which of the following is not associated with absorption costing? 17.​ Under absorption costing, if sales remain constant from period 1 to period 2, the company will
A.​ contribution margin​ C.​ gross margin report a larger income in period 2 when
B.​ functional format​ D.​ Period costs A.​ period 1 production exceeds period 2 production.
B.​ period 2 production exceeds period 1 production.
13.​ Under absorption costing, fixed manufacturing overhead could be found in all of the following C.​ fixed production costs are larger in period 2 than period 1.
except the D.​ variable production costs are larger in period 2 than period 1.
A.​ Cost of Goods Sold.​ C.​ period costs.
B.​ finished goods inventory account.​ D.​ work-in-process account. Variable & absorption costing
18.​ A cost that is included as part of product costs under both absorption costing and direct
14.​ Jansen, Inc. pays bonuses to its managers based on operating income. The company uses costing is:
absorption costing, and overhead is applied on the basis of direct labor hours. To increase A.​ insurance​ D.​ variable marketing expenses.
bonuses, Jansen’s managers may do all of the following except B.​ managerial staff costs​ E.​ variable materials handling labor
A.​ Produce those products requiring the most direct labor. C.​ taxes on factory building
B.​ Defer expenses such as maintenance to a future period.
C.​ Decrease production of those items requiring the most direct labor. 19.​ If unit costs remain unchanged and sales volume and sales price per unit both increase from
D.​ Increase production schedules independent of customer demands. the preceding period when operating profits were earned, operating profits must
A. ​ Increase under the variable costing method.
15.​ Unabsorbed fixed overhead costs in an absorption costing system are B. ​ Decrease under the variable costing method.
A.​ costs that cannot be controlled. C. ​ Increase under the absorption costing method.
B.​ excess variable overhead costs. D. ​ Decrease under the absorption costing method.

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exceeds the normal or practical capacity

20.​ When comparing absorption costing with variable costing, which of the following statements is
23.​ Absorption costing and variable costing are two different methods of assigning costs to units
not true?
produced. Of the following five cost items listed, identify the one that is not correctly accounted
A.​ When sales volume is more than production volume, variable costing will result in higher
for as a product cost.
operating profit.
B.​ Under absorption costing, operating profit is a function of both sales volume and Part of Product Cost under
production volume. Absorption Cost Variable Cost
C.​ Absorption costing enables managers to increase operating profits in the short run by A. Direct labor cost Yes Yes
increasing inventories. B. Insurance on factory Yes No
D.​ A manager who is evaluated based on variable costing operating profit would be tempted C. Manufacturing supplies Yes Yes
to increase production at the end of a period in order to get a more favorable review. D. Packaging and shipping costs Yes Yes
24.​ A company’s net income recently increased by 30% while its inventory increased to equal a full
21.​ A firm presently has total sales of $100,000. If its sales rise, its year’s sales requirements. Which of the following accounting methods would be most likely to
A.​ fixed costs will also rise. produce the favorable income results?
B.​ per unit variable costs will rise. A.​ Absorption costing.​ C.​ Standard direct costing.
C.​ net income based on absorption costing will go up more than its net income based on B.​ Direct costing.​ D.​ Variable costing.
variable costing.
D.​ net income based on variable costing will go up more than its net income based on 25.​ Variable costing and absorption costing will show the same incomes when there are no
absorption costing. A. ​ beginning and ending inventories.
B. ​ beginning inventories.
22.​ Both Company Y and Company Z produce similar products that need negligible distribution C. ​ ending inventories.
costs. Their assets operation and accounting are very similar in all respects except that D. ​ variable costs.
Company Y uses direct costing and Company Z uses absorption costing.
A.​ Co. Z would report a higher net income than Co. Y for the years in which production 26.​ Absorption costing differs from variable costing in that
equals sales A. ​ absorption costing inventories are more correctly valued.
B.​ Co. Y would report a higher inventory value than Co. Z for the years in which production B. ​ companies using absorption costing have lower fixed costs.
exceeds sales C. ​ standards can be used with absorption costing, but not with variable costing.
C.​ Co. Z would report a higher inventory value than Co. Y for the years in which production D. ​ production influences income under absorption costing, but not under variable costing.
exceeds sales
D.​ Co. Y would report a higher inventory value than Co. Z for the years in which production 27.​ In a recent period, Marvel Co. incurred $20,000 of fixed manufacturing overhead and deducted

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$30,000 of fixed manufacturing overhead. Marvel Co. must be using C. ​ Variable costing profits will exceed absorption costing profits.
A.​ absorption costing.​ C.​ standard costing. D. ​ Variable costing will show a higher inventory value than absorption costing.
B.​ direct costing.​ D.​ variable costing.
32.​ A manufacturing company prepares income statements using both absorption- and
28.​ Other things being equal, net income computed by direct costing method would exceed net variable-costing methods. At the end of the period, actual sales revenues, total gross margin,
income computed by absorption costing method if and total contribution margin approximated budgeted figures, whereas net income was
A.​ Units sold were to exceed units produced. substantially below the budgeted amount. There were no beginning or ending inventories.
B.​ Units produced were to exceed units sold. The most likely explanation of the net income shortfall is that, compared to budget, actual
C.​ Fixed manufacturing costs were to increase. A.​ Manufacturing fixed costs had increased.
D.​ Variable manufacturing costs were to increase. B.​ Selling and administrative fixed expenses had increased.
C.​ Sales price and variable costs had declined proportionately.
D.​ Sales prices had declined proportionately more than variable costs.

29.​ Net income is lower under variable costing than under absorption costing when
A. ​ Production equals sales.
B. ​ Production exceeds sales. 33.​ As compared with total absorption costing profit over the entire life of a company, total variable
C. ​ Production is less than sales. costing profit will
D. ​ Production increases from the previous period. A. ​ Be less.
B. ​ Be equal.
30.​ President X of WXY Corporation requested you to explain the difference of net income C. ​ Be greater.
between the variable costing income statements presentation and the absorption costing D. ​ Be substantially greater or less depending upon external factors
method. You would say that the difference
A.​ Is attributable to the variable costs in the inventory. 34.​ How will a favorable volume variance affect net income under each of the following methods?
B.​ Is attributable to the fixed costs in ending inventory. A. B. C. D.
C.​ Is equal to the fixed costs per unit times the number of units sold. Absorption Increase Increase Reduce Reduce
D.​ Is none if there is no change in the fixed costs in the beginning and ending inventories. Variable No effect Reduce Increase No effect

31.​ If inventory quantities increase during a period, 35.​ A single-product company prepares income statements using both absorption and variable
A. ​ Variable costing profits will equal absorption costing profits. costing methods. Manufacturing overhead cost applied per unit produced in 2001 was the
B. ​ Absorption costing profits will exceed variable costing profits. same as in 2000. The 2001 variable costing statement reported a profit whereas the 2001

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absorption costing statement reported a loss. The difference in reported income could be
explained by units produced in 2001 being 3.​ Youthful Biscuits manufactures and sells boxed coconut cookies. The biggest market for these
A.​ Less than units sold in 2001. cookies are as gifts that college students buy for their business teachers. There are 100
B.​ In excess of units sold in 2001. cookies per box. The following income statement shows the result of the first year of
C.​ Less than the activity level used for allocating overhead to the product. operations. This statement was the one included in the company’s annual report to the
D.​ In excess of the activity level used for allocating overhead to the product. stockholders.
Sales (400 boxes at P12.50 a box) P5,000.00
PROBLEMS Less: Cost of goods sold (400 boxes at P8 per box) 3,200.00
Variable costing Gross margin 1,800.00
1.​ MNO Products, Inc. planned and actually manufactured 200,000 units of its single product in Less: Selling and administrative expenses 800.00
2000, its first year of operations. Variable manufacturing costs were P30 per unit of product. Net income 1,000.00
Planned and actual fixed manufacturing costs were P600,000, and marketing and Variable selling and administrative expenses are P0.90 per box sold. The company produced
administrative costs totaled P400,000 in 2000. MNO sold 120,000 units of product in 2000 at 500 boxes during the year. Variable manufacturing costs are P5.25 per box and fixed
a selling price of P40 per unit. What is the cost of the ending inventory assuming variable manufacturing overhead costs total P1,375 for the year.
costing is used? What is the company’s direct costing net income?
A.​ P2,250,000 ​ C.​ P2,640,000 A.​ P 725​ C.​ P2,265
B.​ P2,400,000​ D.​ P2,750,000 B.​ P1,000​ D.​ P2,540
2.​ LY & Company completed its first year of operations during which time the following
information were generated:
Total units produced 100,000 Absorption costing
Total units sold @ P100 per unit 80,000 4.​ The total production cost for 20,000 units was P21,000 and the total production cost for
Work in process ending inventory 20,000 making 50,000 units was P34,000. Once production exceeds 25,000 units, additional fixed
Costs Variable Cost per Unit Fixed Costs costs of P4,000 were incurred. The full production cost per unit for making 30,000 units is:
Raw materials P20.00 A.​ P0.30​ C.​ P0.84
Direct labor 12.50 B.​ P0.68​ D.​ P0.93
Factory overhead 7.50 P1.2 million
Selling and administrative 10.00 0.7 million 5.​ West Co.’s 1988 manufacturing costs were as follows:
If the company used variable (direct) costing method, the operating income would be Direct materials and direct labor​ $700,000
A.​ P2,100,000​ C.​ P3,040,000 Other variable manufacturing costs​ 100,000
B.​ P2,480,000​ D.​ P4,000,000c. Depreciation of factory building and manufacturing equipment​ 80,000

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Other fixed manufacturing overhead​ 18,000 production. Thus, the company produces only units that will be sold by the end of each period.
What amount should be considered product cost for external reporting purposes? For the last period, the following data were available:
A.​ $700,000​ C.​ $880,000 Sales​ $40,000
B.​ $800,000​ D.​ $898,000 Direct materials​ 9,050
Direct labor​ 6,050
6.​ Coomber Industries manufactures a single product using standard costing. Variable Rent (9/10 factory, 1/10 office)​ 3,000
production costs are $13 and fixed production costs are $125,000. Coomber uses a normal Depreciation on factory equipment​ 2,000
activity of 12,500 units to set its standard costs. Coomber began the year with 1,000 units in Supervision (2/3 factory, 1/3 office)​ 1,500
inventory, produced 11,000 units, and sold 11,500 units. The standard cost of goods sold Salespeople’s salaries​ 1,300
under absorption costing would be Insurance (2/3 factory, 1/3 office)​ 1,200
A.​ $115,000​ C.​ $253,000 Office supplies​ 750
B.​ $149,500​ D.​ $264,500 Advertising​ 700
Depreciation on office equipment​ 500
7.​ Z Corp. incurred the following costs in 2001 (its first year of operations) based on production of Interest on loan​ 300
10,000 units: The gross profit margin percentage (rounded) was
Direct material​ $5 per unit A.​ 34%​ C.​ 44%
Direct labor​ $3 per unit B.​ 41%​ D.​ 46%
Variable product costs​ $2 per unit
Fixed product costs (in total)​ $100,000 9.​ 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
When Z Corp. prepared its 2001 financial statements, its Cost of Goods Sold was listed at have remained the same for the last 2 years and are expected to do so in Year 3. Income has
$100,000. Based on this information, which of the following statements must be true: been positive in both Year 1 and Year 2.
A.​ Z Corp. sold 5,000 units. Units Produced Sales Planned Activity
B.​ Z Corp. had a very profitable year. Year 1 90,000 90,000 100,000
C.​ Z Corp. sold all 10,000 units that it produced. Year 2 95,000 95,000 100,000
D.​ From the information given, one cannot tell whether Z Corp.'s financial statements were Year 3 90,000 90,000 100,000
prepared based on variable or absorption costing. Because Blue Company uses an absorption-costing system, gross margin for year 3 should be
A.​ Equal to Year 1.​ C.​ Greater than Year 1.
8.​ A company manufactures a single product for its customers by contracting in advance of B.​ Equal to Year 2.​ D.​ Greater than Year 2.

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Variable and absorption-cost net incomes are:

10.​ Don Juan Ltd. Manufactures a single product for which the costs and selling prices are: A.​ $320 variable, $520 absorption​ C.​ $520 variable, $320 absorption
Variable production costs​ P 50 per unit B.​ $330 variable, $530 absorption​ D.​ $530 variable, $330 absorption
Selling price¶​ P125 per unit
Fixed production overhead​ P200,000 per quarter 13.​ A company had an income of P50,000 using direct costing for a given month. Beginning and
Fixed selling and administrative overhead​ P80,000 per quarter ending inventories for the month are 13,000 units and 18,000 units, respectively. Ignoring
Normal capacity​ 20,000 units per quarter income tax, if the fixed overhead application rate was P2 per unit, what was the income using
Production in first quarter was 19,000 units and sales volume was 16,000 units. No opening absorption costing?
inventory for the quarter. A.​ P40,000​ C.​ P60,000
The absorption costing profit for the quarter was B.​ P50,000​ D.​ P70,000
A.​ P920,000​ C.​ P960,000
B.​ P950,000​ D.​ P970,000 14.​ 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.
Variable costing & absorption costing What is the income under variable costing?
11.​ In the ABC Company, sales are P800,000, cost of goods under absorption costing is A.​ P88,000​ C.​ P100,000.
P600,000, and total operating expenses are P120,000. If cost of goods sold is 70% variable B.​ P93,000​ D.​ P107,000
and total operating expenses are 60% fixed, what is the contribution margin under variable
costing? 15.​ Fleet, Inc. manufactured 700 units of Product A, a new product, during the year. Product A’s
A.​ P260,000.​ C.​ P332,000. variable and fixed manufacturing costs per unit were $6.00 and $2.00 respectively. The
B.​ P308,000.​ D.​ P380,000. 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
12.​ A company has the following cost data: December 31 if variable costing were used instead of absorption costing?
Fixed manufacturing costs​ $2,000 A.​ $0 ​ C.​ $200 increase.
Fixed selling, general, and administrative costs​ 1,000 B.​ $200 decrease.​ D.​ $800 decrease.
Variable selling costs per unit sold​ 1
Variable manufacturing costs per unit​ 2

Beginning inventory​ 0 units 16.​ At the end of Killo Co.’s first year of operations, 1,000 units of inventory remained on hand.
Production​ 100 units Variable and fixed manufacturing cost per unit were $90 and $20, respectively. If Killo uses
Sales​ 90 units at $40 per unit absorption costing rather than direct (variable) costing, the result would be a higher pretax

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income of Direct labor​ $3 per unit

A.​ $0.​ C.​ $70,000. Direct material​ 5 per unit
B.​ $20,000.​ D.​ $90,000. Variable overhead​ 1 per unit
Fixed overhead​ $100,000
17.​ A company manufactures 50,000 units of a product and sells 40,000 units. Total Net income (absorption method)​ $30,000
manufacturing cost per unit is $50 (variable manufacturing cost, $10; fixed manufacturing cost, Sales price per unit​ $40
$40). Assuming no beginning inventory, the effect on net income if absorption costing is used
instead of variable costing is that: 19.​ What would X Co. have reported as its income before income taxes if it had used variable
A.​ net income is the same​ C.​ net income is $400,000 lower costing?
B.​ net income is $200,000 higher​ D.​ net income is $400,000 higher A.​ ($30,000)​ C.​ $30,000
B.​ ($7,500)​ D.​ $67,500
18.​ 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: 20.​ What was the total amount of SG&A expense incurred by X Co.?
Variable Cost per Unit Fixed Costs A.​ $6,000​ C.​ $36,000
Direct materials $15.00 B.​ $30,000​ D.​ $62,500
Direct labor 10.00
Manufacturing overhead 12.50 $2,200,000 21.​ Based on variable costing, what would X Co. show as the value of its ending inventory?
Selling and administrative 2.50 1,375,000 A.​ $24,000​ C.​ $64,500
The difference between operating income calculated on the absorption-costing basis and on B.​ $27,000​ D.​ $120,000
the variable costing basis is that absorption-costing operating income is
A.​ $62,500 lesser.​ C.​ $220,000 greater. Questions 22 through 25 are based on the following information.
B.​ $200,000 greater.​ D.​ $325,000 greater. 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
Questions 19 through 21 are based on the following information. Sales volume $ 800,000 $1,200,000 $1,600,000
The following information is available for X Co. for its first year of operations: Manufacturing costs:
Sales in units​ 5,000 Variable $300,000 $450,000 $600,000
Production in units​ 8,000 Fixed 200,000 200,000 200,000
$500,000 $650,000 $800,000
Selling & other expenses
Manufacturing costs: Variable $200,000 $300,000 $400,000

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Fixed 160,000 160,000 160,000 B.​ $0​ D.​ $180,000

$360,000 $460,000 $560,000
Income (or loss) $(60,000) $90000 $240,000
25.​ Assuming that 90,000 units of Product X were sold during the first 6 months and that this is to
The 200,000 unit budget has been adopted and will be used for allocating fixed manufacturing be used as a basis, the revised budget estimate for the total number of units to be sold during
costs to units of Product X. At the end of the first 6 months, the following information is available: this year is
​ Units A.​ 200,000​ C.​ 360,000
Production completed​ 120,000 B.​ 240,000​ D.​ None of the above
Sales​ 60,000
All fixed costs are budgeted and incurred uniformly throughout the year, and all costs incurred Questions 26 through 31 are based on the following information.
coincide with the budget. Over- and under-applied fixed manufacturing costs are deferred until Valyn Corporation employs an absorption costing system for internal reporting purposes; however,
year-end. Annual sales have the following seasonal pattern. the company is considering using variable costing. Data regarding Valyn’s planned and actual
operations for the 1995 calendar year are presented below.
Portion of Annual Sales Planned Activity Actual Activity
First quarter 10% Beginning finished goods inventory in units 35,000 35,000
Second quarter 20% Sales in units 140,000 125,000
Third quarter 30% Production in units 140,000 130,000
Fourth quarter 40% 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
22.​ The amount of fixed factory costs applied to product during the first 6 months under absorption overhead rate for applying manufacturing overhead to its product. Thus, a combined
costing is manufacturing overhead rate of $9.00 per unit was employed for absorption costing purposes
A.​ Over-applied by $20,000.​ C.​ Under-applied by $80,000. in1995. Any over- or under-applied manufacturing overhead is closed to the cost of goods sold
B.​ Under-applied by $40,000.​ D.​ Equal to the fixed costs incurred. account at the end of the reporting year.

23.​ Reported net income (or loss) for the first 6 months under absorption costing is Planned Cost Incurred
A.​ $(40,000)​ C.​ $40,000 Per Unit Total Costs
B.​ $0​ D.​ $160,000 Direct materials $12.00 $1,680,000 $1,560,000
Direct labor 9.00 1,260,000 1,170,000
24.​ Reported net income (or loss) for the first 6 months under variable costing is Variable manufacturing overhead 4.00 560,000 520,000
A.​ $(180,000)​ C.​ $40,000 Fixed manufacturing overhead 5.00 700,000 715,000

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Variable selling expenses 8.00 1,120,000 1,000,0 was

Fixed selling expenses 7.00 980,000 980,000 A.​ $4,325,000​ C.​ $4,500,000
Variable administrative expenses 2.00 280,000 250,000 B.​ $4,375,000​ D.​ $4,550,000
Fixed administrative expenses 3.00 420,000 425,000
31.​ The difference between Valyn Corporation’s 1995 operating income calculated on the
Total $50.00 $7,000,000 $6,620,
absorption costing basis and calculated on the variable costing basis was
The 1995 beginning finished goods inventory for absorption costing purposes was valued at the A.​ $25,000​ C.​ $65,000
1994 planned unit manufacturing cost, which was the same as the 1995 planned unit B.​ $40,000​ D.​ $90,000
manufacturing cost. There are no work-in-process inventories at either the beginning or the end of Questions 32 through 37 are based on the following information.
the year. The planned and actual unit selling price for 1995 was $70.00 per unit. 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
26.​ The value of Valyn Corporation’s 1995 actual ending finished goods inventory on the costs. Louder began the year with no inventory, produced 11,000 units, and sold 10,500 units.
absorption costing bases was
A.​ $900,000​ C.​ $1,220,000 32.​ Ending inventory under variable costing would be
B.​ $1,200,000​ D.​ $1,350,000 A.​ $10,000​ C.​ $17,500
B.​ $15,000​ D.​ $20,000
27.​ The value of Valyn Corporation’s 1995 actual ending finished goods inventory on the variable
costing basis was 33.​ Ending inventory under absorption costing would be
A.​ $750,000​ C.​ $1,125,000. A.​ $10,000​ C.​ $17,500
B.​ $1,000,000.​ D.​ $1,400,000. D.​ $20,000 ​ B.​ $15,000​
28.​ Valyn Corporation’s total fixed costs expensed in 1995 on the absorption costing bases were 34.​ The volume variance under variable costing would be
A.​ $2,030,000​ C.​ $2,095,000 A.​ $0​ C.​ $15,000
B.​ $2,055,000​ D.​ $2,120,000 B.​ $10,000​ D.​ Some other number.
29.​ Valyn Corporation’s actual manufacturing contribution margin for 1995 calculated on the 35.​ The volume variance under absorption costing would be
variable costing basis was A.​ $0​ C.​ $15,000
A.​ $4,375,000​ C.​ $4,910,000 B.​ $10,000​ D.​ Some other number.
B.​ $4,935,000​ D.​ $5,625,000.
36.​ The standard cost of goods sold under variable costing would be
30.​ The total variable costs expensed in 1995 by Valyn Corporation on the variable costing basis A.​ $200,000​ C.​ $367,500

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B.​ $210,000​ D.​ Some other number. ANSWER KEY

Theory Problem
37.​ The standard cost of goods sold under absorption costing would be 1. A 21. D 1. B 21. B
A.​ $200,000​ C.​ $367,500 2. C 22. C 2. A 22. A
B.​ $210,000​ D.​ Some other number. 3. B 23. D 3. A 23. C
4. D 24. A 4. D 24. B
5. C 25. A 5. D 25. D
When the going gets tough, the tough gets going. 6. D 26. D 6. D 26. B
7. C 27. A 7. A 27. B
8. B 28. A 8. D 28. C
9. A 29. B 9. A 29. D
10. B 30. D 10. B 30. B
11. C 31. B 11. C 31. A
12. A 32. B 12. B 32. A
13. C 33. B 13. C 33. C
14. C 34. A 14. B 34. A
15. D 35. A 15. B 35. C
16. D 16. B 36. B
17. B 17. D 37. C
18. E 18. B
19. A 19. B
20. D 20. D

MSQ-2 – Variable Costing & Absorption Costing Page 11 of 11

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