Absorption-AND- Variable- Costing-KEY+ Answers -482030451 PDF

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ABSORPTION VS. VARIABLE COSTINGACTIVITY 2A) Peter Corporation produces and sells a single product. In 2018, its first year of operation, planned and actual production was 80,000 units. It sold 75,000 of these units for P30 per unit.Planned and actual costs in 2018 were as follows:Manufacturing Non-m...

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ABSORPTION VS. VARIABLE COSTING ACTIVITY 2 A) Peter Corporation produces and sells a single product. In 2018, its first year of operation, planned and actual production was 80,000 units. It sold 75,000 of these units for P30 per unit. Planned and actual costs in 2018 were as follows: Manufacturing Variable Fixed

Non-manufacturing

P480,000 320,000

P400,000 240,000

1. Using Absorption costing, the company’s operating income in 2018 would be? 860,000 2. Using Variable costing, the company’s operating income in 2018 would be? 840,000 B) Zechariah’s Corp. produces and sells boxed choco cookies. There are 100 pieces of cookies per box. The following income statement shows the results of the first year operations. This income statement was the one included in the company’s annual report to the shareholders: Sales (600 boxes at P25 per box) P15,000 Less: Cost of goods sold (600 boxes at P16 per box) Gross margin Less: Selling and administrative expenses Income

9,600 5,400 2,400 3,000

During the year, the Company produced 750 boxes. Variable production costs is P10.50 per box and fixed manufacturing overhead costs totaled P4,125. 1. What is the Company’s variable costing net income? 2,175 2. How much is the ending inventory for both Absorption costing and Variable costing? 2,400 and 1,575 C) Jeremiah Company produces a single product. Production is done only when orders are received from customers. Thus, no inventory is kept at the end of the period. For the last period, the following data were available: Sales P32,000 Materials 7,240 Labor 4,840 Fixed Rent (90% factory, 10% office) 2,400 Fixed Depreciation (80% factory, 20% office) Fixed Supervision (2/3 factory, 1/3 office)

Sales commission Fixed Insurance (60% factory) Office supplies Advertising (Variable)

1,040 960 600 560 2,000 1,200

How much is the company’s Net income under Absorption costing and Variable costing? 11,160

ABSORPTION VS. VARIABLE COSTING ACTIVITY 2

D) During its second year of operations, a company produced 82,500 units but sold only 80,000 units for P26 per unit. It had an inventory balance of 5,000 units at the start of the year. The following costs were incurred during the year: Variable costs per unit Direct materials Direct labor Manufacturing overhead Selling and administrative expenses Fixed costs Manufacturing overhead Selling and administrative expenses

P4.50 3.00 3.75 0.75 P660,000 P412,500

1. Determine the net income under Absorption costing and Variable costing. 67,500 and 47,500 2. Assume that the number of units produced were 80,000 units and the number of units sold were 82,500 units. Determine the net income under Absorption and Variable costing. 61,875 and 82,500 E) Haggai Company produces a single product. At the end of the year, the company had 30,000 units in its ending inventory. Variable production costs are P10 per unit and its fixed manufacturing overhead costs are P5 per unit every year. The Company’s net income for the year was 12,000 higher under variable costing than under absorption costing. Given these facts, the number of units of product in inventory at the beginning inventory of the year must have been? 32,400 F) Zecharaiah Company had 200,000 income using absorption costing. The company had no variable manufacturing costs. Beginning inventory was P15,000 and ending inventory was P22,000. Income under variable costing would have been? 193,000...