CHAPTER 13: STANDARD COSTING, VARIABLE COSTING, AND b.

b. based on practical capacity and a standard fixed cost can be based

THROUGHPUT COSTING on any
level of activity.
Multiple Choice
c. used with variable costing while a standard fixed cost is used
a 1. Which of the following is NOT a type of absorption costing?
with absorption costing.
a. Direct costing. d. likely to be higher than a standard fixed cost per unit.
b. Actual costing.
c. Normal costing. b 13. ABC had P400,000 budgeted fixed overhead costs and based its
d. None of the above. standard on normal activity of 40,000 units. Actual fixed overhead
costs were P430,000, actual production was 36,000 units, and sales
b 2. Variable costing is UNACCEPTABLE for were 30,000 units. The volume variance was
a. managerial accounting. a. P30,000.
b. financial accounting. b. P40,000.
c. transfer pricing. c. P70,000.
d. reporting by product lines for internal purposes. d. P77,777.

d 3. A criticism of variable costing for managerial accounting purposes is that it a 14. Advocates of variable costing for internal reporting purposes do NOT
rely on which of the following points?
a. is not acceptable for product line segmented reporting.
a. The matching concept.
b. does not reflect cost-volume-profit relationships.
b. Price-volume relationships.
c. overstates inventories.
c. Absorption costing does not include selling and
d. might encourage managers to emphasize the short term administrative expenses as part of inventoriable cost.
at the expense of the long term.
d. Production influences income under absorption costing.
c 4. Normal costing and standard costing differ in that
d 15. Calculating income under variable costing does NOT require knowing
a. the two systems can show different overhead budget variances.
a. unit sales.
b. only normal costing can be used with absorption costing.
b. unit variable manufacturing costs.
c. the two systems show different volume variances if standard
hours do not equal actual hours.
c. selling price.
d. normal costing is less appropriate for multiproduct firms. d. unit production.

d 5. Variable costing and absorption costing will show the same incomes a 16. Inventoriable costs under absorption costing include
when there are no a. both fixed and variable production costs.
a. beginning inventories. b. only variable production costs.
b. ending inventories. c. all production costs plus variable selling and administrative costs.
c. variable costs. d. all production costs plus all selling and administrative costs.
d. beginning and ending inventories.
b 17. Inventoriable costs under variable costing include
c 6. ABC had the same activity in 20X3 as in 20X2 except that production a. fixed and variable production costs.
was higher in 20X3 than in 20X2. ABC will show b. variable production costs.
a. higher income in 20X3 than in 20X2. c. all production costs plus variable selling and administrative costs.
b. the same income in both years. d. all production costs plus all selling and administrative costs
c. the same income in both years under variable costing.
d. the same income in both years under absorption costing. d 18. Absorption costing and variable costing differ in that
a. income is lower under variable costing.
b 7. The use of variable costing requires knowing b. variable costing treats selling costs as period costs.
a. the contribution margin and break-even point for each product. c. variable costing treats all variable costs as product costs.
b. the variable and fixed components of production cost. D. inventory cost is higher under absorption costing.
c. controllable and noncontrollable components of all costs.
c 19. Absorption costing differs from variable costing in that
d. the number of units of each product produced during the period.
a. standards can be used with absorption costing, but not with
variable costing.
d 8. Which measure of activity is likely to give the LOWEST standard
b. absorption costing inventories are more correctly valued.
fixed cost per unit?
a. Actual activity. c. production influences income under absorption costing, but
b. Normal capacity. not under variable costing.
c. Budgeted activity. d. companies using absorption costing have lower fixed costs.
d. Practical capacity. a 20. Which method gives the lowest inventory cost per unit?
a. Variable costing.
c 9. Which item is NOT used to compute the fixed overhead volume variance?
b. Absorption costing using normal activity to set the standard fixed
a. Standard fixed cost per unit. cost.
b. Budgeted fixed overhead. c. Absorption costing using practical capacity to set the standard
c. Actual fixed overhead. fixed cost.
d. Actual quantity produced. d. Actual absorption costing.
b 21. Which costs are treated differently under absorption
10. Which variance is LEAST relevant for control purposes? costing and variable costing?
a. Material use variance. a. Variable manufacturing costs.
b. Fixed overhead volume variance. b. Fixed manufacturing costs.
c. Fixed overhead budget variance. c. Variable selling and administrative expenses.
d. Labor efficiency variance. d. Fixed selling and administrative expenses.
a 11. A company that sets a standard fixed cost based on practical capacity
a 22. ABC Company had 15,000 units in ending inventory. The total cost
a. should expect unfavorable volume variances. of those units under variable costing is
b. will set its selling prices too low. a. less than it is under absorption costing.
c. has a higher cost per unit than a company using b. the same as it is under absorption costing.
normal activity to set the standard.
c. more than it is under absorption costing.
d. usually overapplies its fixed costs.
d. any of the above.
a 12. A predetermined overhead rate for fixed costs is unlike a standard fixed
cost per unit in that a predetermined overhead rate is
b 23. York Company had P200,000 income using absorption costing.
a. based on an input factor like direct labor hours and a York has no variable manufacturing costs. Beginning inventory
was P15,000 and ending inventory was P22,000. Income under
standard cost per unit is based on a unit of output.
variable costing would have been
 a. P178,000. d. some other number
b. P193,000.
c. P200,000. c 34. Rounder Industries manufactures a single product. Variable production
costs are P20 and fixed production costs are P300,000. Rounder
d. P207,000. uses a normal activity of 20,000 units to set its standard costs.
Rounder began the year with no inventory, produced 22,000 units,
c 24. An unfavorable volume variance means that and sold 21,000 units. The volume variance under absorption
a. cost control was probably poor. costing would be
b. absorption costing income is lower than variable costing income. a. P0.
c. actual output was less than the level used to set the standard fixed b. P20,000.
cost. c. P30,000.
d. actual output was more than the level used to set the standard d. some other number.
fixed cost.
b 35. Rounder Industries manufactures a single product. Variable production
d 25. Which variance CANNOT arise under variable costing? costs are P20 and fixed production costs are P300,000. Rounder
a. variable overhead budget variance. uses a normal activity of 20,000 units to set its standard costs.
b. variable overhead efficiency variance. Rounder began the year with no inventory, produced 22,000 units,
and sold 21,000 units. The standard cost of goods sold under
c. fixed overhead budget variance. variable costing would be
d. fixed overhead volume variance. a. P400,000.
a 26. Standard costing differs from normal costing in the treatment of
b. P420,000.
a. materials, direct labor, and overhead. c. P735,000.
b. materials and direct labor. d. some other number.
c. direct labor and overhead.
c 36. Rounder Industries manufactures a single product. Variable production
d. overhead.
costs are P20 and fixed production costs are P300,000. Rounder
uses a normal activity of 20,000 units to set its standard costs.
Rounder began the year with no inventory, produced 22,000 units,
D 27. Normal costing differs from actual costing in treating
and sold 21,000 units. The standard cost of goods sold under
a. materials, direct labor, and overhead. absorption costing would be
b. materials and direct labor. a. P400,000.
c. direct labor and overhead. b. P420,000.
d. overhead. c. P735,000.
d. some other number.
c 28. As compared to normal costing, standard costing can yield
a. different volume variances and budget variances. c 37. Alpha Company has a standard fixed cost of P10 per unit. At an actual
b. different budget variances. production
c. different volume variances. of 16,000 units an unfavorable volume variance of P20,000 resulted.
What were total budgeted fixed costs?
d. none of the above.
a. P140,000
C. 29. Under variable costing there can be no b. P160,000
a. fixed overhead variances. c. P180,000
b. fixed overhead budget variance. d. Cannot be determined without further information.
c. fixed overhead volume variance.
d. no fixed overhead. a 38. Beta Company has a standard fixed cost of P10 per unit using a normal
capacity of 11,000 units. An unfavorable volume variance of
c 30. ABC had the same activity in 20X4 as in 20X3 except that production was P12,000 resulted. What was the volume produced?
lower in 20X4 than in 20X3. ABC will show a. 9,800
a. lower income in 20X4 than in 20X3. b. 11,000
b. the same income in both years. c. 12,200
c. the same income in both years under variable costing. d. Cannot be determined without further information.
d. the same income in both years under absorption costing.
a 39. Gamma Corporation has total budgeted fixed costs of P150,000.
a 31. Rounder Industries manufactures a single product. Variable production Actual production was 8,000 units; normal capacity is 7,500
costs are P20 and fixed production costs are P300,000. Rounder units. What was the volume variance?
uses a normal activity of 20,000 units to set its standard costs. a. P10,000 favorable
Rounder began the year with no inventory, produced 22,000 units, b. P15,000 favorable
and sold 21,000 units. Ending inventory under variable costing c. P15,000 unfavorable
would be
a. P20,000. d. P10,000 unfavorable
b. P30,000. b 40. Eastern Co. has total budgeted fixed costs of P150,000. Actual
c. P35,000. production of 39,000 units resulted in a P6,000 favorable volume
d. cannot be determined without further information. variance. What normal capacity was used to determine the fixed
overhead rate?
c 32. Rounder Industries manufactures a single product. Variable production a. 33,000
costs are P20 and fixed production costs are P300,000. Rounder
uses a normal activity of 20,000 units to set its standard costs.
b. 37,500
Rounder began the year with no inventory, produced 22,000 units, c. 40,560
and sold 21,000 units. Ending inventory under absorption costing d. Cannot be determined without further information.
would be
a. P20,000. a 41. Western Company has a standard fixed cost of P8 per unit. At an actual
b. P30,000. production of 8,000 units a favorable volume variance of P12,000
c. P35,000. resulted. What were total budgeted fixed costs?
d. cannot be determined without further information. a. P52,000
b. P64,000
a 33. Rounder Industries manufactures a single product. Variable production c. P76,000
costs are P20 and fixed production costs are P300,000. Rounder d. Cannot be determined without further information.
uses a normal activity of 20,000 units to set its standard costs.
Rounder began the year with no inventory, produced 22,000 units, d 42. Monona Corporation has total budgeted fixed costs of P64,000. Actual
and sold 21,000 units. The volume variance under variable costing production was 15,000 units; normal capacity is 16,000 units. What
would be was the volume variance?
a. P0. a. P4,000 favorable
b. P20,000. b. P4,267 favorable
c. P30,000. c. P4,267 unfavorable
 d. P4,000 unfavorable True-False

b 43. Madison Industries manufactures a single product using standard F 1. Absorption costing incomes are always higher than variable costing incomes.
costing. Variable production costs are P26 and fixed production
F 2. Income under standard variable costing is not influenced by the total amount
costs are P250,000. Madison uses a normal activity of 12,500 units of fixed manufacturing costs.
to set its standard costs. Madison began the year with 1,000 units in
inventory, produced 11,000 units, and sold 11,500 units. T 3. A multi-product company using standard absorption costing calculates
Ending inventory under variable costing would be standard fixed costs for each product using a standard fixed
a. P10,000. overhead rate based on an input factor such as direct labor hours.
b. P13,000.
c. P23,000. T 4. A major difference between standard costing and normal costing is that one
uses actual hours to apply overhead and the other uses standard hours.
d. cannot be determined without further information.
c 44. Madison Industries manufactures a single product using standard T 5. Proponents of variable costing for external reporting argue that while
costing. Variable production costs are P26 and fixed production fixed production costs benefit production as a whole, they do not
costs are P250,000. Madison uses a normal activity of 12,500 units benefit any particular unit of product.
to set its standard costs. Madison began the year with 1,000 units in
inventory, produced 11,000 units, and sold 11,500 units. T 6. A company using absorption costing can increase its income by
Ending inventory under absorption costing would be increasing production without increasing sales.
a. P10,000.
F 7. A company using variable costing can increase its income by increasing
b. P13,000.
production without increasing sales.
c. P23,000.
d. cannot be determined without further information. F 8. Variable costing must be used for internal reporting.

d 45. Madison Industries manufactures a single product using standard F 9. According to GAAP, absorption costing must be used for internal reporting.
costing. Variable production costs are P26 and fixed production
costs are P250,000. Madison uses a normal activity of 12,500 units T 10. According to GAAP, absorption costing must be used for external
to set its standard costs. Madison began the year with 1,000 units in financial reporting.
inventory, produced 11,000 units, and sold 11,500 units. The
volume variance under variable costing would be
a. P10,000.
b. P20,000.
c. P30,000.
d. some other number.

c 46. Madison Industries manufactures a single product using standard

costing. Variable production costs are P26 and fixed production
costs are P250,000. Madison uses a normal activity of 12,500 units
to set its standard costs. Madison began the year with 1,000 units in
inventory, produced 11,000 units, and sold 11,500 units. The
volume variance under absorption costing would be
a. P10,000.
b. P20,000.
c. P30,000.
d. some other number.

b 47. Madison Industries manufactures a single product using standard

costing. Variable production costs are P26 and fixed production
costs are P250,000. Madison uses a normal activity of 12,500 units
to set its standard costs. Madison 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 variable costing would be
a. P230,000.
b. P299,000.
c. P506,000.
d. P529,000.

c 48. Sigma Company has a standard fixed cost of P18 per unit using a normal
capacity
of 9,000 units. A favorable volume variance of P18,000 resulted.
What was the volume produced?
a. 8,000
b. 9,000
c. 10,000
d. Cannot be determined without further information.
c 49. Western Co. has total budgeted fixed costs of P72,000. Actual production
of 5,500 units resulted in a P6,000 unfavorable volume variance. What normal
capacity was used to determine the fixed overhead rate?
a. 5,000
b. 5,500
c. 6,000
d. Cannot be determined without further information.

d 50. Madison Industries manufactures a single product using standard

costing. Variable production costs are P26 and fixed production
costs are P250,000. Madison uses a normal activity of 12,500 units
to set its standard costs. Madison 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. P230,000.
b. P299,000.
c. P506,000.
d. P529,000.