Absorption vs. Variable Costing Quiz 1

Which of the following statement is true?

• Depreciation expense is always a product cost

• Depreciation expense is always a period cost

• Selling and administrative costs, whether variable or fixed, is always treated as period costs under both the absorption and variable costing system

• Income under absorption costing is always greater than income under variable costing

If the production is less than sales (in units), then absorption costing net income will generally be

• greater than variable costing net income

• less than variable costing net income

• equal to variable costing net income

• less than expected

If a firm uses variable costing,

• its product costs include variable selling and administrative costs

• its profit fluctuate with sales

• it calculates an idle variation

• its product cost per unit changers because of changes in the number of units produced.

The inventory costing method that treats direct manufacturing costs and indirect manufacturing costs, both variable and fixed, as inventoriable costs is called

• variable costing

• absorption costing

• conversion costing

• perpetual inventory

What costs are treated as product costs under variable costing?

• all variable costs

• all direct costs only

• all manufacturing costs

• only variable production costs

What amount should be considered product cost for external reporting purposes?

• P13.30

• P18.30

• P11.80

• P14.80

What is the product cost per unit under variable costing?

• P13.30

• P18.30

• P11.80

• P14.80

What is the variable cost per unit for purposes of computing the contribution margin?

• P13.30

• P18.30

• P11.80

• P14.80

Under absorption costing, income for January 2020 was

• P8,200

• P5,200

• P6,700

• P1,700

• P680,000

• P196,000

• P640,000

• P836,000