Republic of the Philippines

Central Philippines State University

VICTORIAS CAMPUS
Hda. Estrella, Barangay XIV, Victorias City, Negros Occidental 6119

TOPIC 3: ABSORPTION AND VARIABLE COSTING

During the month of May , Ellis corporation produced and sold 12,000 units of a product.
Manufacturing annd selling cost incurred during May were:
Direct materials and direct labor P480,000
Variable factory overhead 108,000
Fixed factory overhead 24,000
Variable selling cost 12,000

1. The product unit cost under variable costing was?

a. P51 c. P52
b. P49 d. P50

2. The product unit cost under absorption costing was?

a. P51 c. P52
b. P49 d. P50

Ellys corpration began its operation in 200A. It produces a single product that sells for
P13.50 per unit. The company uses an actual (historical) cost system . During 200A,
150,000 units were produced and 135,000 units were sold. There was no work in process
inventory at December 200A.

Manufacturing cost and selling and admin expenses for 200A are as follows:

Fixed cost Variable cost

Raw materials - 3.5 per unit produced
Direct labor - 2.5 per unit produced
Factory overhead 195,000.00 1 per unit produced
Selling and admin 140,000.00 1.2 per unit sold

3. What amount would ellys corporation's operating income be for 2000A using the variable costing?
a. P702,000 c. 380,500
b. P715,500 d. 400,000

4. What amount would ellys corporation's operating income be for 2000A using the absorption costing?
a. P702,000 c. 380,500
b. P715,500 d. 400,000

5. The cost of ending inventories under the two costing methods were?
Absorption Variable
a. 124,000.00 105,000.00
b. 105,000.00 124,500.00
c. 142,500.00 123,000.00
d. 123,000.00 142,500.00