Responsibi

l
ityAccount
ingandTr
ansf
erPr
icing
(C.VariableCosti
ng&SegmentedRepor
ting)

C.VARI
ABLECOSTI
NGANDSEGMENTEDREPORTI
NG C.An increase i
n the r
emaining usefulli
fe of factor
y machiner
y
depreci
atedonthesum-of
-the-year
s’-
digi
tsmethod.
THEORI ES: D.Anincreasei
nthecommissi
onpai dt
osalesmenf oreachuni
tsol
d.
Dir
ectcosting
1. A basictenetofdi r
ectcostingi sthatper i
odcost sshoul
dbecur rentl
y 4.Whichoft hef oll
owingst atement sist r
ueforaf i
rmt hatusesvar
iabl
e
expensed.Whati stherati
onalebehi ndthi
spr ocedure? (di
rect)costing?
A.Per i
od costs are uncontrol
lable and shoul d notbe char ged toa A.Thecostofauni tofpr oductchangesbecauseofchangesi nthe
specif
icproduct. numberofuni tsmanuf actured.
B.Per i
od costs are generall
yi mmat eri
ali n amountand t he costof B.Pr ofit
sfluctuatewithsales
assi
gning the amount st o specifi
c pr oducts would outweigh the C.Ani dl
efaci l
it
yvari
ationiscal culat
ed
benefi
ts. D.Pr oductcost sincl
ude“ direct”(vari
abl
e)admi
nist
rat
ivecosts.
C.Al l
ocati
on ofper iod costsi s arbi
tr
ary atbestand coul dl ead to
err
oneousdeci si
onsbymanagement . 5.Whichoft hefoll
owingisanar gumentagainsttheuseofdirect(var
iabl
e)
D.Becauseper i
odcost swil
loccurwhet herornotpr oduct
ionoccurs,i
tis cost
ing?
i
mpr operto all
ocatethesecost sto productionand deferacur r
ent A.Absor pti
oncosti
ngoverstat
esthebalances heetval
ueofinventor
ies.
costsofdoingbusiness. B.Var i
ablefact
oryoverheadisaper i
odcost.
C.Fixedf act
oryoverheadisdi
ffi
cultt
oall
ocatepr oper
ly.
1
7.I
navari
abl
ecost i
ngsyst em,pr oductcostincl
udes D.Fixedf act
oryoverheadisnecessaryf
orthepr oduct
ionofaproduct.
A.di
rectmateri
als,dir
ectlabor,var i
abl
eoverhead
B.di
rectmateri
als,dir
ectlabor,fixedoverhead 1
0.Advocatesofvar i
ablecost i
ngf ori
nternalr
eporti
ngpurposesdonotrely
C.di
rectl
abor,variabl
eover head,f i
xedoverhead onwhi chofthefol
lowingpoi nts
?
D.di
rectmateri
als,vari
ableover head,fi
xedoverhead A.Themat chi
ngconcept
B.Pr i
ce-volumerelati
onships
2.Whichofthef oll
owingmustbeknownaboutpr oductionprocessinorder C.Absor pti
on cost i
ng does not i ncl
ude sell
ing and admi
nist
rat
ive
t
oinst
it
uteadir ectcost
ingsyst
em? expensesaspar tofinventori
abl
ecost
A.Thevariabl
eandf i
xedcomponent sofallcost
sr el
atedtoproducti
on. D.Pr oducti
oninfl
uencesi ncomeunderabsor pt
ioncosti
ng
B.Thecont r
ollabl
eandnoncont rol
l
ablecomponent sofal
lcostsrel
atedto
producti
on. 1
3.Whi
chcost i
ngmethodisnotaccept
ablet
otheSFASexter
nalrepor
ti
ng?
C.Standardpr oducti
onratesandti
mesf orallel
ement sofproducti
on. A.absorpti
oncosti
ng C.ful
lcost
ing
D.Contri
buti
onmar gi
nandbr eakevenpointforall
goodsi nproducti
on. B.vari
ablecost
ing D.all
ofthesear
eacceptabl
e

3.Underthedi rectcost
ingconcept,uni
tproductcostwoul
dmostli
kel
ybe 1
6.Var
iablecosti
ngcanbeusedf or
i
ncreasedby A.externalreporti
ng
A.A decr ease in the r
emai ni
ng usefulli
fe of f
actor
y machi
ner
y B.internal
repor t
ing
depreciat
edont heuni
ts-of
-product
ionmethod. C.eitherexternalreport
ingorint
ernalr
eport
ing
B.Adecr easeinthenumberofunitspr
oduced. D.neitherexternalreporti
ngnorint
ernalr
eport
ing

41
3
 Responsibi
l
ityAccount
ingandTr
ansf
erPr
icing
(C.VariableCosti
ng&SegmentedRepor
ting)

Var
iabl
ecost i
ngvs.Absorpti
oncost i
ng
1
2.Whi
choft hefoll
owi ngisnottr
ueofvariablecosting? 6.Whati sthepri
marydifferencebetweenvari
ableandabsorpt
ioncost
ing?
A.Prof
it
smayi ncreasethoughsalesdecr ease. A.i ncl
usionoffi
xedselli
ngexpensesinproductcosts
B.Prof
it
sf l
uctuatewi t
hsales. B.i ncl
usionofvari
abl
ef actoryover
headinperiodcosts
C.Thecostoft hepr oductconsi
stsofallvari
ableproduct
ioncost
s. C.i ncl
usionofvari
abl
esel li
ngexpensesi
npr oductcost
s
D.The income st atementundervar iable costi
ng does notincl
ude D.i ncl
usionoffi
xedfactoryoverheadinpr
oductcosts
over
headvol umevar i
ance.
7.Whi
choft hefol
l
owingstat
ement sistrue?
Contri
but
ionmar gi
nformatincomestat
ement A.Absorpti
oncosti
ngnetincomeexceedsvar iabl
ecost
ingneti
ncome
15.Whenvariablecosti
ngisused,theincomestatementisusual
l
ypr
epar
ed whenuni t
sproducedandsoldar eequal.
usi
ng B.Vari
ablecosti
ngnetincomeexceedsabsor pti
oncost
ingneti
ncome
A.acontributi
onmarginformat C.afunctional
for
mat whenuni t
sproducedexceeduni t
ssold.
B.anoper ati
onalf
ormat D.al
lofthese C.Vari
ablecosti
ngnetincomeexceedsabsor pti
oncost
ingneti
ncome
whenuni t
sproducedequalunitssold.
Absorpti
oncost i
ng D.Absorpti
oncosti
ngnetincomeexceedsvar iabl
ecost
ingneti
ncome
8.Absor pti
on cost i
ng ofi nventori
es,as r equired by GAAP,has been whenuni t
sproducedaregreaterthanunit
ssold.
cr
iti
cizedf orencour agingmanager stoincr easeyear-endinvent
ori
esin
or
dert oboostr eportedprofi
ts.Whi choft hef ol
lowi
ngtechni
quesisthe 22.
Netear ningsdet er minedusingful labsor pti
oncostingcanber econcil
edto
mostef fecti
veatr esolvi
ngthisproblem? netear ningsdet ermi nedusingdi rectcost ingbycomput i
ngt hediff
erence
A.Seni ormanagementcont rolofinventoryl evel
s between
B.Adopt ionofjust-i
n- t
ime(JIT)productionsyst em A.I nvent or
iedf i
xedcost si
nt hebegi nni ngandendi nginventori
esandany
C.Rewar dmanager sbasedupont her esidual i
ncomeapproach def erred over -orunderappliedf i
xedf actoryoverhead.
D.Usevar i
ablecostingtodetermineincomef orbonuspurposes B.I nvent or
ieddi screti
onar
ycost sint hebegi nningandendi nginventori
es.
C.Gr ossmar gin( absorpt
ioncost ing met hod)andcont r
ibuti
onmar gi
n
1
1.Whenabsor pti
oncost
ingi
sused,al
lofthefol
l
owingcostsareconsi
dered (directcostingmet hod)
.
pr
oductcostsexcept D.Sal es as r ecor ded undert he di rectcost i
ng met hod and sales as
A.directl
abor C.vari
able sel
li
ng and recor dedundert heabsor pt
ioncos t
ingmet hod.
admini
str
ati
vecosts
B.variabl
eoverhead D.fi
xedoverhead 23.
Netprofitunderabsorpti
oncosti
ngmaydi ff
erfrom netpr of
itdetermined
underdirectcost
ing.Howi st
hisdif
ferencecalculated?
21
.Unabsorbedf i
xedover headcostsi nanabsor
pti
oncosti
ngsyst
em ar
e A.Changei nthequantit
yofallunit
sininventorytimest herelevantfixed
A.Fi
xedfactor ycostsnotal
locatedtounit
sproduced. costsperunit.
B.Vari
ableover headcostsnotallocat
edtounit
sproduced. B.Changei nthequant i
tyofallunit
spr oducedt i
mest her el
evantf ixed
C.Excessvariableoverheadcosts . costsperunit.
D.Coststhatshouldbecont rol
l
ed. C.Change i nt he quanti
tyofallunitsi ninventorytimest he relevant
vari
ablecostperunit
.

41
4
 Responsibi
l
ityAccount
ingandTr
ansf
erPr
icing
(C.VariableCosti
ng&SegmentedRepor
ting)

D.Changeinthequant
it
yofal
luni
tspr
oducedt
imest
her
elevantvar
iabl
e recognizedasanexpensewhent
he
costperuni
t. A.costi sincur
red C.pr
oducti
ssold
B.pr oductiscomplet
ed D.pr
oducti
sinvent
ori
ed
Sensit
ivit
yanal ysi
s
20.The levelofpr oducti
on af
fect
sincome underwhich oft
he fol
l
owi
ng Segmentreport
ing
met hods? 24.Asegmentisanypar
tofanor
gani
zat
ionaboutwhichamanagerseeks
A.absor pti
oncosting C.vari
ablecost
ing A.costdata C.quanti
tat
ivedat
a
B.bot habsor pti
onandvar i
abl
ecosti
ng D. neit
her absorpt
ion nor B.revenuedata D.anyoftheabove
variablecosti
ng
26.
Whi
choft hefol
lowi
ngcoul
dbeconsi
der
edasegment ?
1
8.Var
iabl
e-cost
ing i
ncomewi l
lusual
l
yexceed absorpt
ioncost
ing i
ncome A.divi
sion C.productl
ine
when B.salester
ri
tor
y D.all
ofthese
A.salesexceedproduct
ion C.pr
oducti
onexceedssales
B.producti
onandsalesareequal D.noneoft hese 25.
Thegui
del
i
ne(s)usedinassi
gni
ngcostst
oasegmenti ncl
ude(s)whether
A.cost
sarefi
xed C.costsar
edirectl
ytr
aceable
1
9.Var
iabl
ecosti
ngnetincomeis B.cost
sarevari
able D.all
oftheabove
A.higherthan absor
pti
on netincome when more unit
sare soldt
han
produced 27.
Segmentmargi
nisequalt
o
B.lowerthanabsorpt
ionnetincomewhenmor eunit
sar eproducedt
han A.sal
esles
svariabl
ecost
s
sold B.sal
esles
svariabl
ecost
sanddirectf
ixedcosts
C.thesameasabsor pti
onnetincomewhenalluni
tsproducedaresol
d C.sal
esles
svariabl
ecost
sandindir
ectfixedcost
s
D.alloft
heabove D.sal
esles
scostofgoodssol
d

9.A manuf act

uring company pr epares income st atement s usi ng both 29.
Revenuelessvar
iabl
ecost
sanddi
rectf
ixedcost
sequals
absor pti
onandvar iablecost i
ngmet hods .Attheendofaper i
odactual A.contri
buti
onmar gi
n C.i ncomebefor
et axes
sales r evenues ,total gr oss pr ofit
, and t otal contribution mar gin B.segmentmar gin D.i ncomeaft
ertaxes
appr oximated budget ed figures,wher easneti ncomewassubst anti
all
y
greatert hant hebudget edamount .Therewer enobegi nni ngorendi ng 30.
Indi
catewhichoft hefoll
owingcost
swouldbeavoi
dedi
fas
egmenti
s
i
nvent ories.Theremostl ikelyexplanationoft heneti ncomei ncreaseis eli
minated.
that,compar edtobudget ,actual 1. vari
ablemanufact
uringcost
s
A.Manuf acturi
ngfi
xedcost shadi ncreased. 2.di r
ectfi
xedcosts
B.Sel l
ingandadmi ni
strati
vef i
xedexpenseshaddecr eased. 3.commonf i
xedcost
s
C.Sal espr i
cesandvar iablecost shadincreasedpr oport
ionat ely. 4.var i
ablesel
li
ngcosts
D.Sal espr i
ceshaddecl i
nedpr oporti
onatelyl
esst hanvariablecost s. 5.di r
ectfi
xedsell
i
ngcost s
6.commonf i
xedsel
li
ngcosts
1
4.When var
iabl
e cost
ing i
s used, f
ixed manuf
act
uri
ng over
head i
s A.2,3,5,6 C.2,3,4,5

41
5
 Responsibi
l
ityAccount
ingandTr
ansf
erPr
icing
(C.VariableCosti
ng&SegmentedRepor
ting)

B.1
,2,4,5 D.1
,4,5,6 C.tot
albudget
edcostbasedonactual
useoft
heser
vice
D.noneoftheabove,becauseal
lt
heabovear
eequal
lyundesi
rabl
e
28.
Which ofthe foll
owing cost
swoul d conti
nue t
o be i
ncur
red even i
fa
segmentiseli
mi nat
ed? PROBLEMS:
A.dir
ectfixedexpens es Vari
ablecost ing
B.commonf ixedcosts Endinginvent ory
C.vari
ablecostofgoodssol d i
. Thef oll
owi nginformationpert
ainstoShar
apovaCor porat
ion:
D.vari
ableselli
ngandadmi nist
rat
iveexpenses Begi nningi nventor
y 0unit
s
Endingi nventory 5,
000unit
s
Costall
ocati
onpolicy Directl aborperunit P10
31.Whichoft hef ol
lowi
ngi sagoodr easonforallocat
ingindi
rectcost
sto Directmat eri
alsperunit 8
operat
ingdepar t
ments? Var i
abl eover headperunit 2
A.Thecompanycoul dl osemoneyiftheoper ati
ngdepartmentsdonot Fixedover headperunit 5
payfortheservi
cest heyuse. Var i
abl eselli
ngcostsperunit 6
B.Tor emindmanager softheneedtocoverindir
ectcost
s. Fixedsel l
i
ngcost sperunit 8
C.Toencour agemanager stousemor eser
vices. Whati st heval ueofendinginvent
oryusi
ngt hevari
abl
ecost i
ngmethod?
D.Todet erminethetruecostsofoperati
ngdepar t
ments. A.P1 55,000 C.P1 00,000
B.P1 25,000 D.P1 95,000
33.
Thecostall
ocat
ionpol i
cymostl ikelytoencourageuseofaser
vicei
s
basedon Absorptioncost ing
A.budgetedtot
alcostsoftheservicedepart
ment Grossmar gin
B.actual
tot
alcostsoftheservi
cedepar tment i
i. A company manuf actur
es a si ngle pr
oduct for i
ts cust
omers by
C.budgetedvari
ablecostsfort
heser vi
cedepart
ment contracti
ng i n advance ofpr oduction. Theref
ore,the company only
D.actual
vari
abl
ecost sfortheservicedepar
tment producesuni tst hatwi l
lbesol dbyt heendofeachper iod.Duri
ngthelast
peri
od,t hef oll
owi ngsal eswer emadeandcost sincur
red:
32.
Theterm“ dualrat
es”refersto Sales P40,
000
A.allocati
ngcost st
osever aloperati
ngdepart
ment s Directmat erials 9,
050
B.allocati
ng fi
xed costsbased oncapaci t
yr equir
ement
sand vari
abl
e Directlabor 6,
000
costsbasedonus e Rent( 9/10f act ory,1/10office) 3,
000
C.allocati
ngbot hactualcostsandbudgetedcost s Depr eciationonf actoryequi pment 2,
000
D.usi ng t
he budgeted ratet o al
locat
e some costs,t
he act
ualr
ateto Super visi
on( 2/ 3f actory,1/3 offi
ce) 1,
500
al
locateothers Salespeopl e’ ,
300
Insurance( 2/ 3f actory,1/3of f
ice) 1,
200
34.
TheWORSTmet hodofall
ocat
ingservi
cedepartmentcost
sist
oall
ocate Of f
icesuppl ies 750
A.tot
alact
ualcost
sbasedonactualuseoftheservice Adver ti
sing 700
B.tot
albudget
edcostsbasedonlong-ter
m expecteduseoft
heservi
ce Depr eciationonof f
iceequipment 500

41
6
 Responsibi
l
ityAccount
ingandTr
ansf
erPr
icing
(C.VariableCosti
ng&SegmentedRepor
ting)

I
nter
estonl
oan 300 B.Theabsorpti
on-costi
ngincomeexceededvar
iabl
e-cost
ingi
ncomeby
Basedontheabovedata,t
hegrossmargi
nper
cent
agef
ort
hel
astper
iod P8,
000.
(r
oundedtonear
estper
cent)was C.Thevari
able-cost
ingincomeexceededabsor
pti
on-cost
ingi
ncomeby
A.41 % C.46% P6,
000.
B.44% D.49% D.Neti
ncomewi l
lnotbediff
erentbet
weenthet
womet hods.

Vari
ablecost i
ngvs.Absor pti
oncost i
ng v. TheBlueCompanyhasf ai
ledtoreachi t
spl annedact ivi
tyl evelduri
ngit
s
Unitcosts fi
rstt
woyear sofoper ati
on. Thef ol
l
owi ngt ableshowst her el
ati
onshi
p
i
ii
.Dur ingMay,RoyCo.pr oduced1 0,000unit
sofProductX.Cost si
ncurr
ed betweenuni t
sproduced,sal es
,andnor mal acti
vi
tyfort heseyear sandthe
byRoydur i
ngMaywer easf oll
ows proj
ectedr el
ati
onshipforYear3.Al lpri
cesandcost shaver emai
nedthe
Directmat eri
als P10,
000 samef orthelasttwoyear sandar eexpectedt odosoi nYear3.I ncome
Directl
abor 20,
000 hasbeenposi ti
veinbothYear1andYear2.
Variabl
emanuf act
uri
ngover head 5,
000 UnitsProduced Sales PlannedAct i
vi
ty
Variabl
esel l
ingandgener al 3,
000 Year1 90,
000 90,000 100, 000
Fixedmanuf act
uri
ngover head 9,
000 Year2 95,
000 95,000 100, 000
Fixedsell
ingandgener al 4,
000 Year3 90,
000 90,000 100, 000
Total P51,
000
BecauseBl ueCompanyusesanabsor pt
ioncost i
ngsyst em,onewoul d
Whatar etheuni tcost
sunderabsor pt
ionandvari
ablecost
ingmet hods,
predi
ctgrossmar ginforYear3t obe
respecti
vely?
A.Gr eaterthanYear1 . C.Equal toYear1 .
A.P5. 10;P3. 80 C.P4.40;P3.50
B.Gr eaterthanYear2. D.Equal toYear2.
B.P3. 80 P5. 1
0 D.P3.50:P4.40
Reconcil
iat
ion
Di
ff
erenceinincome
I
ncomeunderabsor pt i
oncosting
i
v.Considerthef ol
lowi ng:
vi
.Acompanyhadi ncomeofP50, 000usi ngdi
rectcosti
ngforagi
venperi
od.
Salesprice,peruni t P1 8perunit
Begi
nningandendi nginventori
esf orthatperiodwer e13,
000uni
tsand
Standardabsor pti
oncostr ate P1 2perunit
18,
000uni ts,respecti
vely. Ignori
ngi ncomet axes,i
fthefi
xedover
head
Standardvar iablecostrat
e P8peruni t
appl
icati
onr at
ewer eP2. 00peruni t,whatwoul dtheincomehavebeen
Variabl
esel l
ingexpenser at e P2peruni t
usi
ngabs orpti
oncost i
ng?
Fixedselli
ngandadmi ni
strat
iveexpenses P40,000
A.P40, 000
Fixedmanuf acturi
ngover head P60,000
B.P50, 000
Lastper i
od,1 3,000uni tswer epr oduced.Inthecurr
entper i
od,15,000
C.P60, 000
unit
swer epr oduced.I neachper i
od,13,000unit
swer esold.Whatisthe
D.Cannotbedet ermi
nedf rom theinformat
iongiven.
dif
ferenceinr epor tedincomeunderabsor pti
onandvar i
ablecosti
ngfor
thecurrentper i
od?
I
ncomeundervar i
abl
ecosti
ng
A.Thevar i
able- costi
ngincomeexceededabsor pti
on-costi
ngincomeby
vi
i
.LunaCompanyhadi ncomeofP65, 000usingabsorpt
ioncost
ingf
ora
P4,000.
gi
ven per
iod. Begi
nni
ng and endi
ng i
nventor
iesf
orthatperi
od wer
e

41
7
 Responsibi
l
ityAccount
ingandTr
ansf
erPr
icing
(C.VariableCosti
ng&SegmentedRepor
ting)

13,
000uni t
sand18,
000 respecti
vel
y. Or
ewer edropped,neti
ncomef
orZambal
esMini
ngwoul
d
I
gnori
ngi ncomet
axes,i
fthefixedoverheadappl
icat
ionrat
ewer eP2.
50 A.Incr
easebyP1 ,
000,000 C.Decr
easebyP1,
000,
000
peruni
t,whatwoul
dtheincomehavebeenusi ngvari
ablecost
ing? B.Incr
easebyP1 ,
500,00 D.Decr
easebyP1,
500,
000
A.P77, 500 C.P52,500
B.P60, 000 D.P20, 000 xi
.AgingCompanypl anstodiscont
inueasegmentwi thaP32, 000segment
margi
n. Common expenses al located t
ot he segmentamount ed t
o
Unitcontr
ibuti
onmar gin P45,
000,ofwhi chP20, 000cannotbeel imi
natedi fthesegmentwer e
vi
i
i.Thefoll
owi nginformat i
onwasext ractedf
rom t
hefir
styearofabsor pt
ion- cl
osed. Theeffectofclosingdownt hesegmentonAgi ngCompany’
basedaccount i
ngr ecordsofSoulmat eCo. bef
oretaxprofi
twouldbe
Totalfi
xedcost sincurred P100,000 A.P12,000decr ease C.P 7,000decr ease
Totalvari
abl ecostsincurred 50,000 B.P12,000increase D.P 7,000increase
Totalperiodcost sincurr
ed 70,000
Totalvari
abl eperiodcostsincurr
ed 30,000 Uset hi
sdatatorespondtoquestions1 6through17.
Unitsproduced 20,000 Omi dPubli
shi
ngCompanyhast hreedi vi
sions:A,B,andC.Ther evenuesof
Unitssold 12,000 thesedivi
si
onsar eP29,000,48,000,and63, 000respect
ively.Variabl
ecosts
UnitsalesPr i
ce P 12 ofthesedivi
si
onsamountt o57%,59%,and64% oft hegi venr evenues.The
Basedonvar i
ablecost i
ng,ifSoulmateCo.hadsold12,001unit
si nst
ead divi
si
ons'short-
term contr
oll
ablefixedcost sareP4,200,5, 200,and6, 200
of12,000,itsincomebef oretaxeswouldhavebeen respecti
vel
y.The divisi
ons'long-term cont r
oll
abl
ef i
xed cost s amountt o
A.P 9. 50hi gher C.P1 1
.00higher P3,800,4,900,and5, 700int heordergi ven.Thecompany' suncont rol
labl
e
B.P 8. 50hi gher D.P 8.33higher costsamounttoP7, 1
50,andincomet axisat20% ofoperatingincome.

i
x.Atitspresentlevelofoper
ations,asmal lmanufactur
ingfir
m hastotal xi
i
.Long-t
erm cont
rol
l
abl
emar
ginf
ordi
vi
si
onAamount
sto
vari
abl
ecost sequalto75% ofsalesandtotalf
ixedcostsequalto15% of A.P4,
470 C.P12,
470
sal
es.Basedonvar iabl
ecosting,i
fsal
eschangebyP1 .
00,incomewi l
l B.P8,
270 D.P16,
470
changeby
A.P 0.25 C.P 0. 75 xi
i
i.Shor
t-t
erm cont
rol
l
abl
emar
ginf
ordi
vi
si
onBamount
sto
B.P 0.1 2 D.P 0. 10 A.P9,580 C.P19,
680
B.P14,480 D.P23,
580
Segment edI ncomeSt atement
Eff
ectofdr oppingadepar tment Comprehensive
x. Zambal es Mi ni
ng Co.mi nes thr
ee products. Gol d Ore sel
lsfor Quest
ions1 0through13arebasedont hefol
l
owi ngannualfl
exi
blebudget
P1,000,000 pert on,variabl
e cost
sar e P600,000 perton,and fi
xed whi
chhasbeenpr epar
edforuseinmaki
ngdeci
sionsrel
ati
ngtoProductX.
mining costs are P5,000,000. The segmentmar ginfor2005 was Budget edunit
s 100,
000 150,000 200,000
P(1,000,000). ThemanagementofZambal esMi ni
ngwasconsi deri
ng SalesVolume P800,
000 P1,
200, 000 P1,
600,000
droppingt hemi ni
ngofGol dOr e. Onlyone-halfofthefi
xedexpenses Manuf actur
ingcost
s:
ar
edi rectandwoul dbeeliminat
edifthesegmentwasdr opped.IfGold Vari
able P300,
000 P 450, 000 P 600,000

41
8
 Responsibi
l
ityAccount
ingandTr
ansf
erPr
icing
(C.VariableCosti
ng&SegmentedRepor
ting)

Fi
xed 200,
000 200,
000 200,
000
P500,
000 P 650,
000 P 800,
000 xvi
.Reportednetincome(
orl
oss)f
ort
hefi
rssi
xmonthsunderdi
rectcost
ing
Sell
i
ngexpenses: wouldbe
Vari
abl
e P200,000 P 300,
000 P 400,
000 A.P1 44,000. C.P 72,
000
Fi
xed 160,000 160,
000 160,
000 B.P0 D.P(36,
000)
P360,000 P 460,
000 P 560,
000
I
ncome(
orl
oss) (
P60,000) P 90,000 P 240,
000 xvi
i
. Assumi ngthat90,
000unitsofPr
oductXwer esoldduringthefi
rstsi
x
monthsandthatt
hisi
stobeusedasabasis,therevisedbudgetest
imate
The200, 000-uni
tbudgethasbeenadoptedandwi llbeusedf
orallocati
ng fort
hetot
alnumberofuni
tst
obesoldduri
ngthisyearwouldbe
fi
xedmanuf actur
ingcost
stounit
sofPr oductX. Attheendofthef i
rstsi
x A.360,000. C.240,000
monthsthef ol
l
owingi
nfor
mati
onisavai
l
able: B.200,000. D.300,000
Units
Producti
oncomplet
ed 120,000
Sales 60,000 i
. Answer :C
Dir
ectmat eri
als P8
Al
lfi
xedcostsarebudget
edandincur
reduni
for
mlyt
hroughoutt
heyearand Dir
ectlabor 1
0
al
lcost
sincur
redcoi
nci
dewit
hthebudget
. Variabl
eoverhead 2
Totaluni
tcost-var
iabl
ecosti
ng P20
Over-andunder appl
i
edfixedmanufact
uri
ngcostsar
edef er
redunt
il
year -
end. Valueofendinginventor
y(5,000xP20) P1
00,
000
Annualsal
eshavet hefol
l
owingseasonalpat
ter
n:
Port
ionofAnnualSales i
i
. Answer :C
Fi
rstquar
ter 10% Sales P40,
000
Secondquar t
er 20% Costofgoodssol d
Thi
rdquarter 30% Directmat eri
als P9,
050
Fourt
hquar t
er 40% Directlabor 6,
050
100% Rent( 0.9xP3, 000) 2,
700
Depr eciati
on 2,
000
xi
v.Theamountoffi
xedfact
orycostsappl
iedt
oproductdur
ingthef
ir
stsi
x Super visi
on(2/3xP1 ,500) 1,
000
mont
hsunderabsor
pti
oncosti
ngwouldbe Insurance( 2/3xP1 ,
200) 800 (
21,600)
A.Overappl
i
edbyP20,000. C.Underappl
i
edbyP40,000. Grossmar gin P18,400
B.Equaltot
hefi
xedcost
sincurr
ed.D.Underappl
i
edbyP80,000 Grossmar ginpercentage (P1
8,400÷P40,
000) 46%

xv.Reportednetincome(
orl
oss)f
ort
hefi
rstsixmonthsunderabsor
pti
on i
i
i.Answer:C
cost
ingwouldbe Dir
ectmater
ial
s P10,
000
A.P1 60,000 C.P 80,000 Dir
ectl
abor 20,
000
B.P 40, 000 D.P( 40,
000) Vari
abl
eoverhead 5,
000

41
9
 Responsibi
l
ityAccount
ingandTr
ansf
erPr
icing
(C.VariableCosti
ng&SegmentedRepor
ting)

Totalvari
ableproductcost P35,
00 Sel
li
ng&Adm.( variabl
eper i
odcosts)30,000/
12,
000 2.
50
Vari
ableunitcost(P35,000÷1 0,
000) P3.
50 Tot
al vari
abl
ecost/unit P3.
50
AddFixedover headperunit(P9,
000÷10,
000) 0.
90 *Totalvari
abl
ecost s–variableper
iodcost
Absorpti
onunitcost P4.
40 (selli
ng&adm. )=var i
ableproductcost.

i
v.Answer :B i
x.Answer
:A
Fixedover headr at
eperunit
: P12–P8 P4 1
.00 -(
1.00x.
75)= P0.
25
Di ff
erenceinincome: 2,000xP4 P8,
000
Duringt hecur r
entyear,t
hecompany’ . x. Answer:A
Thei nventoryincreased. Ther
efor
e,absor
pti
oncost
ingi
ncomeishi
gher The onlyrel
evanti
nfor
mati
on to comput
et he eff
ectofdroppi
ng the
thant hevariabl
ecost i
ngincome. miningofgol
dor ei
sthenegat
ivesegmentmargin.I ft
hepr
oductli
neis
dropped,t
hecompanycanavoidthenegat
ivemar gi
nofP1mill
i
on.
v. Answer:C
Theproduct
ionanduni
tsal
esdur
ingyear3mat
chedwi
thyear1
. xi
.Answer:C
Avoi
dabl
ecommonexpenses P 25,000
vi
.Answer :C Segmentmarginlost 32,000
Theincomeunderabsor ptioncost i
ngishigherbyP1 0,
000becauset he Decr
easeinprofi
t P( 7,
000)
amountoff ixedoverheadt hatr el
atedtounsolduni t
swasdef er
redand
wasincludedascostoff inishedgoodsi nventory. Thevari
abl
ecosting xi
i
.Answer:A
i
ncomes t
atementi mmediat el
ywr otetheentir
ef ixedover
headthatwas Revenues P29,
000
i
ncurr
eddur ingtheyearasper i
odcost. Vari
ablecost(P29, 000x0.57) 16,
530
Fi
xedover headdeferr
edaspr oductcost:5,000xP2 P10,000 Contr
ibuti
onmar gi
n 12,
470
Absor pti
onincome (P50,000+P1 0,000) P60,000 LessShort-t
erm control
l
ablefi
xedcost 4,
200
Short
-ter
m control
lablemargin 8,
270
vi
i
.Answer:C Long-ter
m contr
ollablef
ixedcost 3,
800
Absorpti
oni
ncome 65,
000 Long-ter
m contr
ollablemargi
n P 4,
470
LessFixedOver
headindecr
easei
ninvent
ory(
18,
000 – 1 5,
000) x
2.50 1
2,500 xi
i
i.Answer:B
I
ncome,Var i
abl
ecost
ing 52,
500 Revenues P48,
000
Vari
ablecost(P48,
000x0.59) 28,
320
vi
i
i.Answer:B Contr
ibut
ionmargin 19,
680
CMRperuni t=Sell
i
ngPr i
ce–Unitvar
iabl
ecost Short
-ter
m contr
oll
abl
efi
xedcost 5,
200
P8.50 =P12.
00–P3. 50 Short
-ter
m contr
oll
abl
emargin–DivB P14,
480
Vari
ableCostPerunit
Product:(
50,000–30,000)/20,
000= P1
.00 xi
v.Answer
:A

420
 Responsibi
l
ityAccount
ingandTr
ansf
erPr
icing
(C.VariableCosti
ng&SegmentedRepor
ting)

Budgetedact
ualfi
xedoverhead(0.
5xP200,000) P100,000
Appl
iedfi
xedoverhead (1
20,000xP1 .
00) 120,000
Overappl
iedf
ixedover
head (favor
abl
evol
umevar i
ance) P 20,000

xv.Answer:B
Sal
es( 60,
000xP8) P480,
000
Costofgoodssold( 60,
000xP4) 240,
000
Grossprofi
t 240,
000
Sell
i
ngandot herexpenses(
60,
000x2)+P80,
000 200.
000
Absorpti
onprofi
t P 40,
000

xvi
.Answer :B
Totalcont r
ibuti
onmar gi
n( 60,
000xP3) P1
80,
000
Less:Fi xedmanuf actur
ingOH P100,
000
Fixedsel l
i
ngandot herexpenses 80,
000 1
80,000
Variabl
ecost ingprofi
t NI
L
CM peruni t(P1.6M –P0.6M –P0.4M)÷200,
000) P3.
00

xvi
i
. Answer :D
Thesalespatt
ernindi
catedt
hatsalesf
orthefir
stsemesterwas30%.The
assumpti
onwast hatt
hepatter
nwasst il
lvali
d. Theref
oretheassumed
90,000unit
swouldbe30per centofexpectedannualsal
es.
(90,
000÷0. 3)=300,000unit
s

421