Name:
AFAR 1: Advance Financial Accounting and Reporting 1
Theories:
1. Which of the following is only included as a product cost under absorption costing but not under
variable costing?
A. Direct materials
B. Direct labor
C. Variable manufacturing overhead
D. Fixed manufacturing overhead
2. How is fixed manufacturing overhead treated under variable costing?
A. It is included in inventory
B. It is added to each unit cost
C. It is expensed in full in the period incurred
D. It is ignored entirely
3. Which of the following is always considered a period cost under both absorption and variable costing?
A. Fixed manufacturing overhead
B. Direct labor
C. Fixed selling and administrative expenses
D. Variable manufacturing overhead
4. This allocates overhead costs based on activities performed.
A. Overhead Costs
B. Trditional costing
C. Activity Based Costing
D. Costs Pool
5.This uses single cost pool and cost driver to allocate overhead costs.
A. Overhead Costs
B. Traditional Costing
C. Activity Based Costing
D.Cost pool and Cost driver
Problems:
1. BGC Company produces two products. AB and XY and use a costing system in which all overhead is
accumulated in a single cost pool and allocated based on machine hours. CBA’s management has decided
to implement ABC because a study has revealed a significant amount of OH cost related to set-up activity
and design activity. The number of set-ups and the number of design hours will be the activity drivers for
the new cost pools, and machine hours will continue as the base for allocating the remaining OH.
a. Calculate the total and per-unit costs reported for the two products by the existing traditional costing
system.
b. Calculate the total and per-unit costs reported for the two products by the ABC system.
2. VC Corporation has the following data available to you:
Sales (P50 selling price)
P500,000
Direct materials
20,000
Beginning Inventory
2,000
Direct labor
30,000
Production
12,000
Overhead:
Variable
10,000
Fixed
60,000
Selling & Admin:
Variable
15,000
Fixed
25,000
Compute for the following:
a) Net Income – Absorption Costing
b) Net Income – Variable Costing
c) Reconciliation of Net Income
Units:
0
