PROBLEM 2

Bobadski Company sells a single product for P25. It had no beginning inventories. Operating data follow:
Sales, 55,000 units P 1,375,000
Normal capacity 60,000 units
Production costs:
Variable per unit P 13
Fixed production P 300,000
Selling and administrative expenses:
Variable per unit sold P 2
Fixed selling P 40,000
Number of units produced 66,000 units

Assume the actual costs were as budgeted.

5. How much is the amount of the company’s manufacturing margin?
VARIABLE COSTING – ACCDG TO COST BEHAVIOR

Sales 1,375,000

Less: Variable Costs

(DM, DL, VFOH)

VCOS (units sold x PC) (55,000 x 13) 715,000

MANUFACTURING MARGIN 660,000

6. Compute the net income under standard variable costing.

VARIABLE COSTING

Sales 1,375,000

Less: Variable Costs

(DM, DL, VFOH)

VCOS (units sold x PC) (55,000 x 13) 715,000

Manufacturing margin 660,000

Less: VSAEx (55,000 x P2/u) 110,000

Contribution Margin 550,000

Less: Fixed Costs

FFOH 300,000

FSAEx 40,000 340,000

NET INCOME 210,000

 7. Compute the net income under standard absorption costing.
ABSORPTION COSTING

Sales (units sold x SP) 1,375,000

Less: Cost of Sales

(DM, DL, VFOH, FFOH)

(units sold x PC)(55,000 x 18) 990,000

Gross Profit 385,000

Less: VSAEx (55,000 x 2) 110,000

(Volume Variance) (30,000)

FSAEx 40,000 120,000

NET INCOME 265,000

PROBLEM 3
The following data relate to Jamilianova, Inc., a new company:

Planned and actual production 200,000 units

Sales at P48 per unit 170,000 units
Manufacturing costs:
Variable P18 per unit
Fixed P840,000
Selling and administrative costs:
Variable P7 per unit
Fixed P925,000

There were no variances during the period.

Required:
9. Determine the number of units in the ending finished-goods inventory.
Planned and Actual Production 200,000

(Sales) (170,000)

ENDING FINISHED-GOODS INVENTORY 30,000 units

10. Calculate the cost of the ending finished-goods inventory under variable costing
COST ENDING FINISHED GOODS INVENTORY:
30,000 units x P18 = P540,000

11. Determine the company's absorption-costing net income.

ABSORPTION COSTING

Sales (170,000 x 48) 8,160,000

Less: Cost of Sales

(DM, DL, VFOH, FFOH)

(units sold x PC)(170,000 x 22.2) 3,774,000

Gross Profit 4,386,000

Less: VSAEx (170,000 x 7) 1,190,000

FSAEx 925,000 2,115,000

NET INCOME 2,271,000

PROBLEM 4
Berbanovic, Inc., began business at the start of the current year and maintains its accounting records on
an absorption-cost basis. The following selected information appeared on the company's income
statement and end-of-year balance sheet:

Income-statement data:
Sales revenues (35,000 units x P22) P770,000
Gross margin 210,000
Total sales and administrative expenses 160,000
Balance-sheet data:
Ending finished-goods inventory (12,000 units) 192,000

Kim achieved its planned production level for the year. The company's fixed manufacturing
overhead totaled P141,000, and the firm paid a 10% commission based on gross sales pesos to its sales
force.

Required:
12. How many units did Kim plan to produce during the year.
Sales 35,000 units

Ending Finished-Goods Inventory 12,000 units

PRODUCTION 47,000 units

13. How much fixed manufacturing overhead did the company apply to each unit produced?
MANUFACTURING OVERHEAD TO EACH UNIT:
141,000 / 47,000 = P3 to each unit

14. How much variable cost did the company attach to each unit manufactured?
Ending Finished-Goods Inventory 192,000

Fixed Cost (12,000 x P3) 36,000

VARIABLE COST 156,000

PROBLEM 5
Georganichi Corporation has fixed manufacturing cost of P12 per unit. Consider the three independent
cases that follow.

Case A: Absorption- and variable costing net income each totaled P240,000 in a period when the firm
produced 18,000 units.

Case B: Absorption-costing net income totaled P320,000 in a period when finished-goods inventory levels
rose by 7,000 units.

Case C: Absorption-costing net income and variable-costing net income respectively totaled P220,000 and
P250,000 in a period when the beginning finished-goods inventory was 14,000 units.

Required:
15. In Case A, how many units were sold during the period?
Absorption Costing and Variable Costing income will be the same amount when inventory levels are
unchanged. Thus, sales totaled 18,000 units.

16. In Case B, how much income would Beachcraft report under variable costing?
DIFFERENCE BETWEEN ABSORPTION COSTING INCOME AND VARIABLE COSTING INCOME

Absorption Costing Net Income 320,000

Variable Costing Net Income (7,000 units x P12) (84,000)

DIFFERENCE 236,000

17. In Case C, how many units were in the ending finished-goods inventory?
Beginning Finished-Goods Inventory 14,000 units

Change in Inventory [(P250,000-220,000)/P12] (2,500 units)

ENDING FINISHED-GOODS INVENTORY 11,500 units

 PROBLEM 6
Holland Products began operations on January 3 of the current year. Standards were established in early
January assuming a normal production volume of 160,000. However, the company produced only 140,000
units of product and sold 100,000 units at selling price of P180 per unit during the current year. Variable
costs totaled P7,000,000, of which 60% were manufacturing and 40% were selling. Total fixed costs
amount to P11,200,000 of which 50% comes from the manufacturing. There were no raw materials or
work in process inventories at the end of the year. Actual input prices per unit of product and actual input
quantitative per unit of product were equal to standard.

Variable Costing Absorption Costing

Variable Costs 4,200,000 4,200,000/140,000=30

Fixed Costs 5,600,000/160,000=35

Total 4,200,000 9,800,000

Production 140,000

Production per cost unit 30 per unit 65 per unit

Required:
1. Determine the cost of goods sold using full absorption costing.
ABSORPTION COSTING

Units Sold at Selling Price 100,000

x Product cost per unit 65

COST OF GOODS SOLD 6,500,000

2. How much cost would be assigned to ending inventory using direct and absorption costing?
DIRECT COSTING

Ending Inventory (140,000-100,000) 40,000

Product cost per unit 30

ENDING INVENTORY COST 1,200,000

3. Compute the factory overhead volume variance for the year.

Standard Production 160,000

(Actual Production) (140,000)

Over-Absorbed Capacity 20,000

X Standard Fixed Overhead per unit 35

VOLUME VARIANCE 700,000

 4. How much would be the difference in income using absorption and variable costing?
VARIABLE COSTING

Sales 18,000,000

Less: Variable Costs

(DM, DL, VFOH)

VCOS (units sold x PC) (100,000 x 30) 3,000,000

Manufacturing margin 15,000,000

Less: VSAEx (100,000 x 28) 2,800,000

Contribution Margin 12,200,000

Less: Fixed Costs

FFOH

FSAEx 11,200,000

NET INCOME 1,000,000

ABSORPTION COSTING

Sales (units sold x SP) 18,000,000

Less: Cost of Sales

(DM, DL, VFOH, FFOH)

(units sold x PC)( 100,000 x 35) 3,500,000

Gross Profit 15,500,000

Less: VSAEx (100,000 x 28) 2,800,000

FSAEx 11,200,000 14,000,000

NET INCOME 1,500,000

DIFFERENCE BETWEEN ABSORPTION COSTING INCOME AND VARIABLE COSTING INCOME

Absorption Costing Net Income 1,500,000

Variable Costing Net Income (7,000 units x P12) (1,000,000)

DIFFERENCE 500,000
PROBLEM 7
Garcianakis Corporation, which uses throughput costing, began operations at the start of the current
year. Planned and actual production equaled 20,000 units, and sales totaled 17,500 units at P95 per
unit. Cost data for the year were as follows:

Direct materials (per unit) P 18

Conversion cost:
Direct labor 160,000
Variable manufacturing overhead 280,000
Fixed manufacturing overhead 340,000
Selling and administrative costs (total) 430,000

The company classifies direct materials as a throughput cost.

Required:
18. Compute the company's total cost for the year.
Direct Materials (20,000 units x P18) 360,000

Direct Labor 160,000

Variable Manufacturing 280,000

Overhead

Fixed Manufacturing Overhead 340,000

Selling and Administrative 430,000

Costs 0

TOTAL 1,570,000

19. How much of this cost would be held in year-end inventory under throughput costing?
THROUGHPUT COSTING

Direct Materials 360,000

÷ Actual Production 20,00 units

18

x Year End Inventory 2,500 units

YEAR END INVENTORY COST 45,000

20. How much will be the company's net income under throughput-costing ?
THROUGHPUT COSTING

Sales (17,500 units x P95) 1,662,500

(Total Costs) (1,570,000)

Year End Inventory Cost 45,000

INCOME 137,500