The following information was extracted from the

13. The following information was extracted from the first year of absorption-based accounting records of
Soulmate Co.
Total fixed costs incurred P100,000
Total variable costs incurred 50,000
Total period costs incurred 70,000
Total variable period costs incurred 30,000
Units produced 20,000
Units sold 12,000
Unit sales Price P 12
Based on variable costing, if Soulmate Co. had sold 12,001 units instead of 12,000, its income before taxes
would have been
A. P 9.50 higher C. P11.00 higher
B. P 8.50 higher D. P 8.33 higher
14. At its present level of operations, a small manufacturing firm has total variable costs equal to 75% of sales and
total fixed costs equal to 15% of sales. Based on variable costing, if sales change by P1.00, income will change
by
Full/Absorption costing
15. Absorption costing of inventories, as required by GAAP, has been criticized for encouraging managers to
increase year-end inventories in order to boost reported profits. Which of the following techniques is the most
effective at resolving this problem?
16. When absorption costing is used, all of the following costs are considered product costs except 17. Unabsorbed fixed overhead costs in an absorption costing system are
A. Fixed factory costs not allocated to units produced.
B. Variable overhead costs not allocated to units produced.
C. Excess variable overhead costs.
D. Costs that should be controlled.
3 of 7

Gross margin
18. A company manufactures a single product for its customers by contracting in advance of production. Therefore,
the company only produces units that will be sold by the end of each period. During the last period, the following
sales were made and costs incurred:
Sales P40,000
Direct materials 9,050
Direct labor 6,000
Rent (9/10 factory, 1/10 office) 3,000
Depreciation on factory equipment 2,000
Supervision (2/3 factory, 1/3 office) 1,500
Salespeople’s salaries 1,300
Insurance (2/3 factory, 1/3 office) 1,200
Office supplies 750
Advertising 700
Depreciation on office equipment 500
Interest on loan 300
Based on the above data, the gross margin percentage for the last period (rounded to nearest percent) was