Strategic Management- Activity PDF

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When all manufacturing cost used in production are attached to the products, whether direct, or indirect, variable of fixed, this is called: a. Process Costing b. Absorption Costing c. Variable Costingd. Job Order Costing An operation costing system isa. Identical to a process costing system except ...

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4. When all manufacturing cost used in production are attached to the products, whether direct, or indirect, variable of fixed, this is called: a. Process Costing c. Variable Costing b. Absorption Costing d. Job Order Costing 5. An operation costing system is a. Identical to a process costing system except that actual cost is used for manufacturing overhead. b. The same as a process costing system except that materials are allocated on the basis of batches of production. c. The same as a job order costing system except that materials are accounted for in the same way as they are in a process costing system. d. The same way as a job order costing system except that no overhead allocations are made since actual costs are used throughout. 6. If production is greater than sales (units), then absorption costing net income will generally be a. greater than direct costing net income. b. less than direct costing net income. c. equal to direct costing net income. d. additional data is needed to be able to answer.

30. If net earnings were higher using standard direct costing than using standard absorption costing, what can be said about sales during the period if inventory is priced using FIFO method? a. Sales increased. c. Sales decreased. b. Sales exceed production. d. Sales were less than production. 31. If sales equal production, one would expect net income under the variable costing method to be a. The same as net income under the absorption costing method. b. Greater than net income under the absorption costing method. c. Differing in as much as the difference between sales and production. d. Less than net income under the absorption costing method. 32. When a firm prepares financial reports by using absorption costing a. Profits will always increase with increases in sales. b. Profits will always decrease with decreases in sales. c. Profits may decrease with increased sales even if there is no change in selling prices and costs. d. Decreased output and constant sales result in increased profits.

47. A manufacturing company employs variable costing for internal reporting and analysis purposes. However, it converts its records to absorption costing for external reporting. The Accounting Department always reconciles the two operating income figures to assure that no errors have occurred in the conversion. Financial data for the year are presented below. The fixed manufacturing overhead cost per unit was based on the planned level of production of 480,000 units. Budgeted and Actual Levels for sales and production Budget

Actual

Sales (in units)

495,000

510,000

Production (in units)

480,000

500,000

Standard Unit Manufacturing Costs

Variable Costing

Absorption Costing

P 10.00

P 10.00

Fixed Manufacturing Overhead

0

6.00

Total Unit Manufacturing Costs

P 10.00

P 16.00

Variable Costs

The difference between the operating income calculated under the variable costing method and the operating income calculated under the absorption costing method would be a. P 57,000 b. P 60,000

Solution: Change in inventory (500,000 – 510,000) × Fixed Overhead Cost per unit Difference in Income

c. P 90,000 d. P 120,000

P 10,000 6.00 P 60,000

4. Unit product cost, fixed cost and profit. Haiyan Corporation produces a product with the following data: A. Standard production costs per unit ( Normal Capacity = 20,000 units): Direct Materials Direct Labor Variable Overhead Fixed Overhead

2lbs. @ P 6.00 1.25 hrs. @ P20.00 1.25 hrs. @ P4.00 1.25 hrs. @ P8.00

P 12.00 25.00 5.00 10.00

B. Standard distribution and administration expenses: Variable Expenses Fixed Expenses

P 3.00 per unit P 200,000 per month

C. Regular unit sales price P 200.00 D. Actual Data: Beginning Inventory Production Sales

2,200 units 19,000 units 18,400 units

Required: a. The standard unit product cost under absorption costing and variable costing systems. b. The budgeted fixed production costs. c. Profit using absorption costing and variable costing under each of the following independent cases:

Production 1. 20,000

Sales 22,000

2. 3.

20,000 20,000

19,300 20,000

4.

23,000

23,500

5.

17,500

17,200

Solution: Absorption Costing

Variable Costing

Direct Materials

12

12

Direct Labor

25

25

Variable Factory Overhead

5

5

Fixed Factory Overhead

10

-

Standard product cost per unit

52

42

a.

b. Budgeted Fixed Production Costs

Budgeted Fixed Overhead = Normal Capacity × Standard Fixed Overhead Rate = P20,000 × 10 = P200,000

Budgeted Fixed Expenses = Normal Capacity × Standard Fixed Expenses Rate = P20,000 × 10 = P200,000

c. Profit Under Absorption and Variable Costing Sales (22,000 × 200) Cost of Sales (22,000 × 52) Gross Income Less: Selling & Admin.

P4,400,000 1,444,000 P3,256,000

Expenses Variable (P3 × 22,000)

P66,000

Fixed

200,000

266,000

Absorption Costing Income

P 2,990,000

Sales (22,000 × 200)

P4,400,000

Cost of Sales (22,000 × 42)

924,000

Manufacturing Margin

P3,476,000

Less: Variable Admin. Expenses

66,000

Contribution Margin

P3,410,000

Less: Fixed Costs Fixed Factory Overhead (P10 × 20,000)

P200,000

Fixed Admin. Expenses

200,000

Variable Costing Income

400,000 P3,010,000

2.

Sales (19,300 × 200) Cost of Sales (19,300 × 52) Gross Income

P3,860,000 1,003,600 P2,856,400

Less: Selling & Admin. Expenses Variable (P3 × 19,300)

P57,900

Fixed

200,000

257,900

Absorption Costing Income

P 2,598,500

Sales (19,300 × 200)

P3,860,000

Cost of Sales (19,300 × 42)

810,600

Manufacturing Margin

P3,049,400

Less: Variable Admin. Expenses

57,900

Contribution Margin

P2,991,500

Less: Fixed Costs Fixed Factory Overhead (P10 × 20,000)

P200,000

Fixed Admin. Expenses

200,000

Variable Costing Income

400,000 P2,591,500

3. Sales (20,000 × 200)

P4,000,000

Cost of Sales (20,000 × 52)

1,040,000

Gross Income

P2,960,000

Less: Selling & Admin. Expenses Variable (P3 × 20,000)

P60,000

Fixed

200,000

260,000

Absorption Costing Income

P 2,700,000

Sales (20,000 × 200)

P4,000,000

Cost of Sales (20,000 × 42)

840,000

Manufacturing Margin

P3,160,000

Less: Variable Admin. Expenses

60,000

Contribution Margin

P3,100,000

Less: Fixed Costs Fixed Factory Overhead (P10 × 20,000)

P200,000

Fixed Admin. Expenses

200,000

Variable Costing Income

400,000 P2,700,000

4. Sales (23,500 × 200)

P4,700,000

Cost of Sales (23,500 × 52)

1,222,000

Gross Income

P3,478,000

Less: Selling & Admin. Expenses Variable (P3 × 23,500)

P70,500

Fixed

200,000

270,500

Absorption Costing Income

P 3,207,500

Sales (23,500 × 200)

P4,700,000

Cost of Sales (23,500 × 42)

987,000

Manufacturing Margin

P3,713,000

Less: Variable Admin.

70,500

Expenses Contribution Margin

P3,642,500

Less: Fixed Costs Fixed Factory Overhead (P10 × 23,000)

P230,000

Fixed Admin. Expenses

200,000

Variable Costing Income

430,000 P3,212,500

5. Sales (17,200 × 200)

P3,440,000

Cost of Sales (17,200 × 52)

894,400

Gross Income

P2,545,600

Less: Selling & Admin. Expenses Variable (P3 × 17,200)

P51,600

Fixed

200,000

Absorption Costing Income

251,600 P 2,294,000

Sales (17,200 × 200)

P3,440,000

Cost of Sales (17,200 × 42)

722,400

Manufacturing Margin

P2,717,600

Less: Variable Admin. Expenses

51,600

Contribution Margin

P2,666,000

Less: Fixed Costs Fixed Factory Overhead (P10 × 17,500)

P175,000

Fixed Admin. Expenses

200,000

Variable Costing Income

375,000 P2,291,000...