AC 2102 MANAGEMENT ACCOUNTING
VARIABLE COSTING
MULTIPLE CHOICE
Basic Concepts
1. Under the direct costing, which is classified as product costs?
A. Only variable production costs.
B. Only direct costs.
C. All variable costs.
D. All variable and fixed production costs.
(rpcpa)
1. A
? The product costs under the direct costing.
Under the direct costing model, only variable production costs such as direct materials, direct labor,
and variable factory overhead are included in the determination of the product costs.Fixed factory
overhead is classified as a period costs, that is, automatically deducted from sales as an expense
regardless of sales volume level.Hence, choice-letter “a” is correct.
Choice-letter “b” is incorrect because there are direct costs that are fixed costs. Choice-letter “c”
is incorrect because it refers to all variable costs and expenses. Variable expenses are always period
costs either under absorption costing or variable costing model. Choice-letter “d” is incorrect because
under direct costing fixed manufacturing costs are period costs.
2. In absorption costing, as contrasted with direct costing, the following are absorbed into inventory.
A. All the elements of fixed and variable manufacturing overhead.
B. Only the fixed manufacturing overhead.
C. Only the variable manufacturing overhead.
D. Neither fixed nor variable manufacturing overhead.
(rpcpa)
2. A
? The elements absorbed into inventory using the absorption costing model.
Choice-letter “a” is correct because all manufacturing costs, whether variable or fixed, are included in
the determination of product costing using the absorption costing method. Because of such principle,
choice-letters “b”, “c”. and “d” are all incorrect.
3. The absorption costing method includes in inventory
Fixed factory Variable factory
overhead overhead .
A. No No
B. No Yes
C. Yes Yes
D. Yes No
(aicpa)
3. C
? Items included in inventory under absorption costing.
The following items are included in the inventory cost using the absorption costing method: direct
material, direct labor, variable overhead, and fixed overhead. Choice-letter “c” is the correct answer.
4. In an income statement prepared as an internal report using the direct (variable) costing method,
fixed selling and administrative expenses would
A. Not be used.
B. Be used in the computation of the contribution margin.
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