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TB ch13 Standard costing quizzer
Cost Accounting and Control (University of the East (Philippines))
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STANDARD COSTING VARIANCES & VARIABLE COSTING
Problems
1. Whitehall Company sells a single product for P25.
inventories. Operating data follow.
Sales, 27,000 units
Normal capacity
Production costs:
Variable per unit
Fixed production
Selling and administrative expenses:
Variable per unit sold
Fixed selling
Number of units produced
It had no beginning
P675,000
30,000 units
P13
P150,000
P2
P20,000
32,500 units
Assume the actual costs were as budgeted.
a. Find contribution margin per unit.
b. Compute the ending inventory under standard variable costing.
c. Compute the income under standard variable costing.
Assume standard absorption costing using normal capacity as the basis for
computing the standard fixed cost per unit. Compute
d. Standard gross profit per unit.
e. Ending inventory.
f. Volume variance.
g. Income.
SOLUTION:
a. P10
(P25 - P13 -P2)
b. P71,500
c. P100,000
d. P7
[P13 x ending inventory of 5,500 units (32,500 - 27,000)]
[(27,000 x P10) - (P150,000 + P20,000)]
[P25 - P13- (P150,000/30,000)]
e. P99,000
[5,500 x (P13 + P5)]
f. P12,500 F
[(32,500 - 30,000) x P5 standard fixed cost per unit]
g. P127,500
[(27,000 x P7) + P12,500 - (27,000 x P2) - P20,000]
2. Lund Company sells a single product for P25.
inventories. Operating data follow.
Sales, 55,000 units
Normal capacity
Production costs:
Variable per unit
Fixed production
Selling and administrative expenses:
Variable per unit sold
Fixed selling
Number of units produced
It had no beginning
P1,375,000
60,000 units
P13
P300,000
P2
P40,000
66,000 units
Assume the actual costs were as budgeted.
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a. Compute income under standard variable costing.
b. Compute income under standard absorption costing.
SOLUTION:
a. P210,000
[55,000 x (P25 - 13 - 2) - (P300,000 + P40,000)]
b. P265,000 {P1,375,000 - 55,000 x [P13 + (P300,000/60,000)] - 55,000 x P2
- P40,000 + P30,000 volume variance}
3. Maiden Rock Company sells a single product for P25.
inventories. Operating data follow.
Sales, 20,000 units
Normal capacity
Production costs:
Variable per unit
Fixed production
Selling and administrative expenses:
Variable per unit sold
Fixed selling
Number of units produced
It had no beginning
P500,000
30,000 units
P13
P150,000
P2
P20,000
32,500 units
Assume the actual costs were as budgeted.
a. Find Maiden Rock’s income under standard variable costing.
b. Find Maiden Rock’s income under standard absorption costing.
SOLUTION:
a. P30,000
[20,000 x (P25 - 13 - 2) - (P150,000 + P20,000)]
b. P92,500
{P500,000 - 20,000 x [P13 + [P150,000/30,000)] - 20,000 x P2
- P20,000 + P12,500 volume variance}
4. Genco Inc. makes a single product that sells for P50. The standard variable
manufacturing cost is P32.50 and the standard fixed manufacturing cost is
P7.50, based on producing 20,000 units. During the year Genco produced
22,000 units and sold 21,000 units. Actual fixed manufacturing costs were
P157,000; actual variable manufacturing costs were P735,000. Selling and
administrative expenses, all fixed, were P75,000. There were no beginning
inventories.
a. Prepare a standard absorption costing income statement.
b. Prepare a standard variable costing income statement.
SOLUTION:
a. Sales (21,000 x P50)
Cost of Goods Sold (21,000 x P40)
P840,000
Variances:
Variable Spending
P20,000 Un
Fixed Spending
7,000 Un
Volume
(15,000) F
12,000
Adjusted Cost of Goods Sold
Gross Profit
Selling & Administrative
Net Income
P1,050,000
852,000
P198,000
75,000
P123,000
b. Sales
P1,050,000
Variable Costs (21,000 x P32.50)
P682,500
Variable Spending Variance
20,000 Un
Adjusted Variable Cost of Goods Sold
702,500
Contribution Margin
P347,500
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Fixed Costs:
Manufacturing
Selling & Administrative
Net Income
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P157,000
75,000
232,000
P115,500
5. Brahms Corp. has the following data:
Normal capacity
25,000
Practical capacity
30,000
Budgeted production
20,000
Actual production
22,000
Actual sales (P25 per unit)
21,000
Standard variable production cost per unit
P15
Budgeted fixed production costs
P120,000
There were no variable cost variances for the year. Fixed costs incurred
were equal to the budgeted amount. There were no beginning inventories and
no selling or administrative expenses.
a. Compute the absorption costing income if fixed costs per unit are
determined using normal capacity.
b. Compute the absorption costing income if fixed costs per unit are
determined using practical capacity.
c. Compute the absorption costing income if fixed costs per unit are
determined using budgeted production.
d. Compute the variable costing income.
SOLUTION:
a. P94,800
[P525,000 - (21,000 x P19.80) - P14,400 volume variance]
Volume variance P14,400 = P120,000/25,000 x 22,000 - P120,000
b. P94,000
[P525,000 - (21,000 x P19) - P32,000 volume variance]
Volume variance P32,000 = P120,000/30,000 x 22,000 - P120,000
c. P96,000
[P525,000 - (21,000 x P21) + P12,000 volume variance]
Volume variance P12,000 = P120,000/20,000 x 22,000 - P120,000
d. P90,000
[P525,000 - (21,000 x P15) - P120,000]
6. Cumberland Company sells a single product for P30.
inventories. Operating data follow.
Sales, 12,000 units
Normal capacity
Production costs:
Variable per unit
Fixed production
Selling and administrative expenses:
Variable per unit sold
Fixed selling
Number of units produced
It had no beginning
P360,000
20,000 units
P15
P75,000
P5
P25,000
13,000 units
Assume the actual costs were as budgeted.
a. Find contribution margin per unit.
b. Compute the ending inventory under standard variable costing.
c. Compute the income under standard variable costing.
Assume standard absorption costing using normal capacity as the basis for
computing the standard fixed cost per unit. Compute
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d. Standard gross profit per unit.
e. Ending inventory.
f. Volume variance.
g. Income.
SOLUTION:
a. P10
(P30 - P15 - P5)
b. P15,000
[P15 x ending inventory of 1,000 units (13,000 - 12,000)]
c. P20,000
[(12,000 x P10) - (P75,000 + P25,000)]
d. P11.25
[P30 - P15 - (P75,000/20,000)]
e. P18,750
f. P26,250 U
g. P23,750
[1,000 x (P15 + P3.75)]
[(20,000 - 13,000) x P3.75 standard fixed cost per unit]
[(12,000 x P11.25) - P26,250 - (12,000 x P5) - P25,000]
7. Acme Company sells a single product for P30.
inventories. Operating data follow.
It had no beginning
Sales, 12,000 units
Normal capacity
Production costs:
Variable per unit
Fixed production
Selling and administrative expenses:
Variable per unit sold
Fixed selling
Number of units produced
P360,000
15,000 units
P17
P75,000
P5
P25,000
13,500 units
Assume the actual costs were as budgeted.
a.
Compute income under standard variable costing.
b.
Compute income under standard absorption costing.
SOLUTION:
a. P(4,000)
[(12,000 x (P30 - P17 - P5) - (P75,000 + P25,000)]
b. P3,500 {P360,000 - 12,000 x [P17 + (P75,000/15,000)] - 12,000 x P5
- P25,000 - P7,500 volume variance}
8. Carlson Company sells a single product for P30.
inventories. Operating data follow.
Sales, 12,500 units
Normal capacity
Production costs:
Variable per unit
Fixed production
Selling and administrative expenses:
Variable per unit sold
Fixed selling
Number of units produced
It had no beginning
P375,000
15,000 units
P17
P75,000
P5
P25,000
13,000 units
Assume the actual costs were as budgeted.
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a. Find Carlson’s income under standard variable costing.
b. Find Carlson’s income under standard absorption costing.
SOLUTION:
a. P -0-
[12,500 x (P30 - P17 - P5) - (P75,000 + P25,000)]
b. P2,500
{P375,000 – 12,500 x [P17 + (P75,000/15,000)] – 12,500 x P5
- P25,000 - P10,000 volume variance}
9. Bach Inc. makes a single product that sells for P40. The standard variable
manufacturing cost is P22 and the standard fixed manufacturing cost is P8,
based on producing 30,000 units. During the year Bach produced 28,000 units
and sold 26,000 units. Actual fixed manufacturing costs were P235,000;
actual variable manufacturing costs were P595,000. Selling and
administrative expenses were P95,000. There were no beginning inventories.
a. Prepare a standard absorption costing income statement.
b. Prepare a standard variable costing income statement.
SOLUTION:
a. Sales (26,000 x P40)
P1,040,000
Cost of Goods Sold (26,000 x P30)
P780,000
Variances:
Variable Spending
P(21,000) F
Fixed Spending
( 5,000) F
Volume
16,000 Un (10,000)
Adjusted Cost of Goods Sold
770,000
Gross Profit
P270,000
Selling & Administrative
95,000
Net Income
P175,000
b. Sales
P1,040,000
Variable Costs (26,000 x P22)
P572,000
Variable Spending Variance
(21,000) F
Adjusted Variable Cost of Goods Sold
551,000
Contribution Margin
P489,000
Fixed Costs:
Manufacturing
235,000
Selling & Administrative
95,000
330,000
Net Income
P159,000
10. Hayden Corp. has the following data:
Normal capacity
40,000
Practical capacity
45,000
Budgeted production
30,000
Actual production
35,000
Actual sales (P20 per unit)
32,000
Standard variable production cost per unit
P12
Budgeted fixed production costs
P135,000
There were no variable cost variances for the year. Fixed costs incurred
were equal to the budgeted amount. There were no beginning inventories and
no selling or administrative expenses.
a. Compute the absorption costing income if fixed costs per unit are
determined using normal capacity.
b. Compute the absorption costing income if fixed costs per unit are
determined using practical capacity.
c. Compute the absorption costing income if fixed costs per unit are
determined using budgeted production.
d. Compute the variable costing income.
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SOLUTION TO THE LAST PROBLEM
a. P131,125
[P640,000 - (32,000 x P15.375) - P16,875 volume variance]
Volume variance P16,875 = P135,000/40,000 x 35,000 - P135,000
b. P130,000
[P640,000 - (32,000 x P15) - P30,000 volume variance]
Volume variance P30,000 = P135,000/30,000 x 35,000 - P135,000
c. P134,500
[P640,000 - (32,000 x P16.50) + P22,500 volume variance]
Volume variance P22,500 = P135,000/30,000 x 35,000 - P135,000
d. P121,000
[P640,000 - (32,000 x P12) - P135,000]
Multiple Choice
1. Which of the following is NOT a type of absorption costing?
a. Direct costing.
b. Actual costing.
c. Normal costing.
d. None of the above.
2. Variable costing is UNACCEPTABLE for
a. managerial accounting.
b. financial accounting.
c. transfer pricing.
d. reporting by product lines for internal purposes.
3. A criticism of variable costing for managerial accounting purposes is
that it
a. is not acceptable for product line segmented reporting.
b. does not reflect cost-volume-profit relationships.
c. overstates inventories.
d. might encourage managers to emphasize the short term at the expense
of the long term.
4. Normal costing and standard costing differ in that
a. the two systems can show different overhead budget variances.
b. only normal costing can be used with absorption costing.
c. the two systems show different volume variances if standard hours do
not equal actual hours.
d. normal costing is less appropriate for multiproduct firms.
5. Variable costing and absorption costing will show the same incomes when
there are no
a. beginning inventories.
b. ending inventories.
c. variable costs.
d. beginning and ending inventories.
6. ABC had the same activity in 20X3 as in 20X2 except that production was
higher in 20X3 than in 20X2. ABC will show
a. higher income in 20X3 than in 20X2.
b. the same income in both years.
c. the same income in both years under variable costing.
d. the same income in both years under absorption costing.
7. The
a.
b.
c.
d.
use of variable costing requires knowing
the contribution margin and break-even point for each product.
the variable and fixed components of production cost.
controllable and noncontrollable components of all costs.
the number of units of each product produced during the period.
8. Which measure of activity is likely to give the LOWEST standard fixed
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cost per unit?
a. Actual activity.
b. Normal capacity.
c. Budgeted activity.
d. Practical capacity.
9. Which item is NOT used to compute the fixed overhead volume variance?
a. Standard fixed cost per unit.
b. Budgeted fixed overhead.
c. Actual fixed overhead.
d. Actual quantity produced.
10. Which variance is LEAST relevant for control purposes?
a. Material use variance.
b. Fixed overhead volume variance.
c. Fixed overhead budget variance.
d. Labor efficiency variance.
11. A company that sets a standard fixed cost based on practical capacity
a. should expect unfavorable volume variances.
b. will set its selling prices too low.
c. has a higher cost per unit than a company using normal activity to
set the standard.
d. usually overapplies its fixed costs.
12. A predetermined overhead rate for fixed costs is unlike a standard fixed
cost per unit in that a predetermined overhead rate is
a. based on an input factor like direct labor hours and a standard cost
per unit is based on a unit of output.
b. based on practical capacity and a standard fixed cost can be based on
any level of activity.
c. used with variable costing while a standard fixed cost is used with
absorption costing.
d. likely to be higher than a standard fixed cost per unit.
13. ABC had P400,000 budgeted fixed overhead costs and based its standard on
normal activity of 40,000 units. Actual fixed overhead costs were
P430,000, actual production was 36,000 units, and sales were 30,000
units. The volume variance was
a. P30,000.
b. P40,000.
c. P70,000.
d. P77,777.
14. Advocates of variable costing for internal reporting purposes do NOT rely
on which of the following points?
a. The matching concept.
b. Price-volume relationships.
c. Absorption costing does not include selling and administrative
expenses as part of inventoriable cost.
d. Production influences income under absorption costing.
15. Calculating income under variable costing does NOT require knowing
a. unit sales.
b. unit variable manufacturing costs.
c. selling price.
d. unit production.
16. Inventoriable costs under absorption costing include
a. both fixed and variable production costs.
b. only variable production costs.
c. all production costs plus variable selling and administrative costs.
d. all production costs plus all selling and administrative costs.
17. Inventoriable costs under variable costing include
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a.
b.
c.
d.
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fixed and variable production costs.
variable production costs.
all production costs plus variable selling and administrative costs.
all production costs plus all selling and administrative costs.
18. Absorption costing and variable costing differ in that
a. income is lower under variable costing.
b. variable costing treats selling costs as period costs.
c. variable costing treats all variable costs as product costs.
d. inventory cost is higher under absorption costing.
19. Absorption costing differs from variable costing in that
a. standards can be used with absorption costing, but not with variable
costing.
b. absorption costing inventories are more correctly valued.
c. production influences income under absorption costing, but not under
variable costing.
d. companies using absorption costing have lower fixed costs.
20. Which method gives the lowest inventory cost per unit?
a. Variable costing.
b. Absorption costing using normal activity to set the standard fixed
cost.
c. Absorption costing using practical capacity to set the standard fixed
cost.
d. Actual absorption costing.
21. Which costs are treated differently under absorption costing and variable
costing?
a. Variable manufacturing costs.
b. Fixed manufacturing costs.
c. Variable selling and administrative expenses.
d. Fixed selling and administrative expenses.
22. ABC Company had 15,000 units in ending inventory. The total cost of those
units under variable costing is
a. less than it is under absorption costing.
b. the same as it is under absorption costing.
c. more than it is under absorption costing.
d. any of the above.
23. York Company had P200,000 income using absorption costing. York has no
variable manufacturing costs. Beginning inventory was P15,000 and ending
inventory was P22,000. Income under variable costing would have been
a. P178,000.
b. P193,000.
c. P200,000.
d. P207,000.
24. An unfavorable volume variance means that
a. cost control was probably poor.
b. absorption costing income is lower than variable costing income.
c. actual output was less than the level used to set the standard fixed
cost.
d. actual output was more than the level used to set the standard fixed
cost.
25. Which variance CANNOT arise under variable costing?
a. variable overhead budget variance.
b. variable overhead efficiency variance.
c. fixed overhead budget variance.
d. fixed overhead volume variance.
26. Standard costing differs from normal costing in the treatment of
a. materials, direct labor, and overhead.
b. materials and direct labor.
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c. direct labor and overhead.
d. overhead.
27. Normal costing differs from actual costing in treating
a. materials, direct labor, and overhead.
b. materials and direct labor.
c. direct labor and overhead.
d. overhead.
28. As compared to normal costing, standard costing can yield
a. different volume variances and budget variances.
b. different budget variances.
c. different volume variances.
d. none of the above.
29. Under variable costing there can be no
a. fixed overhead variances.
b. fixed overhead budget variance.
c. fixed overhead volume variance.
d. no fixed overhead.
30. ABC had the same activity in 20X4 as in 20X3 except that production was
lower in 20X4 than in 20X3. ABC will show
a. lower income in 20X4 than in 20X3.
b. the same income in both years.
c. the same income in both years under variable costing.
d. the same income in both years under absorption costing.
31. Rounder Industries manufactures a single product. Variable production
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, and sold 21,000
units. Ending inventory under variable costing would be
a. P20,000.
b. P30,000.
c. P35,000.
d. cannot be determined without further information.
32. Rounder Industries manufactures a single product. Variable production
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, and sold 21,000
units. Ending inventory under absorption costing would be
a. P20,000.
b. P30,000.
c. P35,000.
d. cannot be determined without further information.
33. Rounder Industries manufactures a single product. Variable production
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, and sold 21,000
units. The volume variance under variable costing would be
a. P0.
b. P20,000.
c. P30,000.
d. some other number.
34. Rounder Industries manufactures a single product. Variable production
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, and sold 21,000
units. The volume variance under absorption costing would be
a. P0.
b. P20,000.
c. P30,000.
d. some other number.
35. Rounder Industries manufactures a single product. Variable production
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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, and sold 21,000
units. The standard cost of goods sold under variable costing would be
a. P400,000.
b. P420,000.
c. P735,000.
d. some other number.
36. Rounder Industries manufactures a single product. Variable production
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, and sold 21,000
units. The standard cost of goods sold under absorption costing would be
a. P400,000.
b. P420,000.
c. P735,000.
d. some other number.
37. Alpha Company has a standard fixed cost of P10 per unit. At an actual
production of 16,000 units an unfavorable volume variance of P20,000
resulted. What were total budgeted fixed costs?
a. P140,000
b. P160,000
c. P180,000
d. Cannot be determined without further information.
38.
39.
Beta Company has a standard fixed cost of P10 per unit using a normal
capacity of 11,000 units. An unfavorable volume variance of P12,000
resulted. What was the volume produced?
a. 9,800
b. 11,000
c. 12,200
d. Cannot be determined without further information.
Gamma Corporation has total budgeted fixed costs of P150,000. Actual
production was 8,000 units; normal capacity is 7,500 units. What was the
volume variance?
a. P10,000 favorable
b. P15,000 favorable
c. P15,000 unfavorable
d. P10,000 unfavorable
40.
Eastern Co. has total budgeted fixed costs of P150,000. Actual
production of 39,000 units resulted in a P6,000 favorable volume
variance. What normal capacity was used to determine the fixed overhead
rate?
a. 33,000
b. 37,500
c. 40,560
d. Cannot be determined without further information.
41.
Western Company has a standard fixed cost of P8 per unit. At an actual
production of 8,000 units a favorable volume variance of P12,000
resulted. What were total budgeted fixed costs?
a. P52,000
b. P64,000
c. P76,000
d. Cannot be determined without further information.
42.
Monona Corporation has total budgeted fixed costs of P64,000. Actual
production was 15,000 units; normal capacity is 16,000 units. What was
the volume variance?
a. P4,000 favorable
b. P4,267 favorable
c. P4,267 unfavorable
d. P4,000 unfavorable
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43. 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. Ending inventory under
variable costing would be
a. P10,000.
b. P13,000.
c. P23,000.
d. cannot be determined without further information.
44. 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. Ending inventory under
absorption costing would be
a. P10,000.
b. P13,000.
c. P23,000.
d. cannot be determined without further information.
45. 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
variable costing would be
a. P10,000.
b. P20,000.
c. P30,000.
d. some other number.
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.
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.
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.
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
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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.
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.
b.
c.
d.
P230,000.
P299,000.
P506,000.
P529,000.
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