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    Finals Unit 4 Exercise - Variable and Absorption Costing

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    Melo Riego
    This document contains two assignments involving variable and absorption costing. The first assignment asks students to calculate unit costs using variable and absorption costing for two products, ladies' and men's wallets, and prepare various income statements and a segmented income statement. The second assignment asks students to prepare contribution format income statements using variable costing for two years of a company's operations, and reconcile the net operating incomes under variable and absorption costing.

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    Finals Unit 4 Exercise - Variable and Absorption Costing

    Uploaded by

    Melo Riego
    152 views2 pages
    This document contains two assignments involving variable and absorption costing. The first assignment asks students to calculate unit costs using variable and absorption costing for two products, ladies' and men's wallets, and prepare various income statements and a segmented income statement. The second assignment asks students to prepare contribution format income statements using variable costing for two years of a company's operations, and reconcile the net operating incomes under variable and absorption costing.

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    Finals Unit 4 exercise - Variable and Absorption Costing

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    This document contains two assignments involving variable and absorption costing. The first assignment asks students to calculate unit costs using variable and absorption costing for two products, ladies' and men's wallets, and prepare various income statements and a segmented income statement. The second assignment asks students to prepare contribution format income statements using variable costing for two years of a company's operations, and reconcile the net operating incomes under variable and absorption costing.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    152 views2 pages

    Finals Unit 4 Exercise - Variable and Absorption Costing

    Uploaded by

    Melo Riego
    This document contains two assignments involving variable and absorption costing. The first assignment asks students to calculate unit costs using variable and absorption costing for two products, ladies' and men's wallets, and prepare various income statements and a segmented income statement. The second assignment asks students to prepare contribution format income statements using variable costing for two years of a company's operations, and reconcile the net operating incomes under variable and absorption costing.

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    Finals Module: 2nd Assignment

    Variable and Absorption Costing

    Refer to Chapter 10 of your book

    1. Jacob Company produces a ladies’ wallet and a men’s wallet. Selected data for the past year
    follow:
    Ladies’ Wallet Men’s Wallet
    Production (units) 100,000 200,000
    Sales (units) 90,000 210,000
    Selling price P5.50 P4.50
    Direct labor hours 50,000 80,000
    Manufacturing costs:
    Direct materials P75,000 P100,000
    Direct labor 250,000 400,000
    Variable overhead 20,000 24,000
    Fixed overhead:
    Direct 50,000 40,000
    Commona 20,000 20,000
    Nonmanufacturing costs:
    Variable selling 30,000 60,000
    Direct fixed selling 35,000 40,000
    Common fixed sellingb 25,000 25,000
    a
    Common overhead totals P40,000 and is divided equally between the two products.
    b
    Common fixed selling costs total P50,000 and are divided equally between the two products.

    Budgeted fixed overhead for the year, P130,000, equalled the actual fixed overhead. Fixed
    overhead is assigned to the products using a plantwide rate based on expected direct labor hours,
    which were 130,000. The company had 10,000 men’s wallets in inventory at the beginning of the
    year. These wallets had the same unit cost as the men’s wallets produced during the year.

    Required:
    a. Compute the unit cost for the ladies’ and men’s wallets using the variable-costing method.
    Compute the unit cost using absorption costing
    b. Prepare an income statement using variable costing.
    c. Prepare and income statement using variable costing.
    d. Prepare a segmented income statement using the products as segments.
    2. During ABC Company’s first two years of operations, the company reported net operating
    income as follows (absorption costing basis):

    Year 1 Year 2
    Sales (at P50 per unit) P1,000,000 P1,500,000
    Less Cost of goods sold:
    Beginning inventory 0 170,000
    Add cost of goods manufactured (at P34 per unit) 850,000 850,000
    Goods available for sale 850,000 1,020,000
    Less ending inventory (at P34 per unit) 170,000 0
    Cost of goods sold 680,000 1,020,000
    Gross margin 320,000 480,000
    Less selling and administrative expenses* 310,000 340,000
    Net operating income P10,000 P140,000

    *P3 per unit variable; P250,000 fixed each year.

    The company’s P34 unit product cost is computed as follows:


    Direct materials P8
    Direct labor 10
    Variable manufacturing overhead 2
    Fixed manufacturing overhead
    (P350,000/25,000 units) 14
    Unit product cost P34

    Production and cost data for the two years are given below:

    Year 1 Year 2
    Units produced 25,000 25,000
    Units sold 20,000 30,000

    Required:

    a. Prepare an income statement for each year in the contribution format using variable costing.
    b. Reconcile the absorption costing and variable costing net operating income figures for each
    year.

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