Absorption and Variable Costing
Absorption and Variable Costing
Absorption and Variable Costing
Exercise # 1.
a. Inventory cost per unit under absorption and
variable costing:
Abs Var
DM 1,500 1,500
DL 1,000 1,000
VOH 500 500
FxOH 2,000 _____
5,000 3,000
÷ 1,000 1,000
P5 P3
b. Cost of ending inventory under absorption and
variable costing:
[invty. end = 20% since only 80% was sold]
1,000 x 20% = 200; 200 x P 5 = P1,000
x P 3 = P 600
Exercise # 2.
or
375 – (1,375) = (3,500 – 0)P.50
1,750 = P1,750
c. Determine the 2013 profit under variable and
absorption costing.
Abs
Sales [11.5xP2] P23,000
CGS [3.5xP1.25] 4,375
[8xP1.35**] 10,800 15,175
GP 7,825
Expenses 7,500
Income P 325
Var
Sales P23,000
VMC [11,500xP.75 8,625
VSA [7,500x50%] 3,750 12,375
CM 10,625
FxMC 5,400
FxSA [7,500x50%] 3,750 9,150
Income 1,475
** (6,750 +5,400)/9,000 = 1.35
Y (Abs) P 325
FxFOH in invty. beg [3,500xP.50] 1,750
FxFOH in invty. end [1,000xP.60] (600)
Y (var) P1,475
or
(325-1,475) = [3,500xP.50] 1,750
[1,000xP.60] (600)
1,150 = 1,150
Exercise # 4.
Exercise # 6.
difference = P20T
Seatwork:
1. # of units manufactured = 200,000 units
variable mfg. costs = P30/unit
fixed mfg. costs = P600,000
selling and admin. costs = P400,000
Sales (P40/unit) = 120,000 units
Required: a. operating income using
(1) absorption and (2) variable costing
b. reconciliation of income difference
2. Direct materials used = P300,000
Direct labor = 100,000
variable factory overhead = 50,000
fixed factory overhead = 80,000
selling & admin. costs – variable = 40,000
selling & admin. costs – fixed = 20,000
Required: inventoriable costs using
(1) absorption and (2) variable costing