Management Accounting Variable costing

Problem 1. Dexter Corporation produces and sells a single product, a Problem 2. Jorgansen Lighting, Inc., manufactures heavy-duty street
wooden hand loom for weaving small items such as scarves. Selected cost lighting systems for municipalities. The company uses variable costing for
and operating data relating to the product for two years are given below: internal management reports and absorption costing for external reports
to shareholders, creditors, and the government. The company has provided
Selling price per unit P50 the following data:
Manufacturing costs:
Variable per unit produced: Year 1 Year 2 Year 3
Direct materials 11 Beginning units 200 170 180
Direct labor 6 Ending units 170 180 220
Manufacturing overhead 3 Variable costing net income P1,080,400 P1,032,400 P996,400
Fixed manufacturing overhead per year 120,000
Selling and administrative expenses: The company’s fixed manufacturing overhead per unit was constant at
Variable per unit sold 4 P560 for all three years.
Fixed per year 60,000
Year 1 Year 2 Year 3 1. Determine each year’s absorption costing net operating income.
Beginning inventory 0 0 2,000 Present your answer in the form of a reconciliation report.
Produced during the year 6,000 10,000 6,000
Sold during the year 6,000 8,000 8,000 2. In Year 4, the company’s variable costing net operating income was
Ending inventory 0 2,000 0 P984,400 and its absorption costing net operating income was
P1,012,400. Did inventories increase or decrease during Year 4? How
1. Assume the company uses absorption costing. much fixed manufacturing overhead cost was deferred or released
a. Compute the unit product cost in each year. from inventory during Year 4?
b. Prepare an income statement for each year.
Problem 3. HJ Turner Corporation produces a single product. Data
2. Assume the company uses variable costing. concerning the company's operations last year appear below:
a. Compute the unit product cost in each year.
Units in beginning inventory 0
b. Prepare an income statement for each year.
Units produced 10,000
Units sold 9,000
3. Determine how much of the ending inventory consists of fixed
manufacturing overhead cost deferred in inventory to the next period. Selling price per unit P60
Variable costs per unit:
Direct materials P15
4. Reconcile the variable costing and absorption costing net operating
incomes. Direct labor P5
Variable manufacturing overhead P2
Variable selling and administrative P4
Fixed costs in total:

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Management Accounting
Fixed manufacturing overhead P200,000
Fixed selling and administrative P70,000
Assume direct labor is a variable cost.
1. Compute the unit product cost under both absorption and variable
costing.
2. Compute the total variable cost per unit.
3. Compute the total fixed cost per unit.
4. Compute the income statement for the year using absorption costing.
5. Compute the income statement for the year using variable costing.
6. Compute the amount of fixed manufacturing overhead in the ending
inventory.
Stead Company produces a single product. Last year, the company's net
operating income computed by the absorption costing method was P6,400,
and its net operating income computed by the variable costing method was
P9,100. The company's unit product cost was P17 under variable costing
and P20 under absorption costing. If the ending inventory consisted of
2,100 units, the beginning inventory in units must have been:
A. 1,200
B. 2,100
C. 3,000
D. 4,800
A company produces a single product. Variable production costs are P12
per unit and variable selling and administrative expenses are P3 per unit.
Fixed manufacturing overhead totals P36,000 and fixed selling and
administration expenses total P40,000. Assuming a beginning inventory of
zero, production of 4,000 units and sales of 3,600 units, the dollar value of
the ending inventory under variable costing would be:
A. P4,800
B. P8,400
C. P6,000
D. P3,600
Variable costing
A company that produces a single product had a net operating income of
P85,500 using variable costing and a net operating income of P90,000
using absorption costing. Total fixed manufacturing overhead was
P150,000, and production was 100,000 units. Between the beginning and
the end of the year, the inventory level:
A. increased by 4,500 units
B. decreased by 4,500 units
C. increased by 3,000 units
D. decreased by 3,000 units
King Company produces a single product. During March, the company had
net operating income under absorption costing that was P3,500 lower than
under variable costing. The company sold 7,000 units in March, and its
variable costs were P7 per unit, of which P3 was variable selling expense. If
fixed manufacturing overhead was P2 per unit under absorption costing,
then how many units did the company produce during March?
A. 5,250 units
B. 8,750 units
C. 6,500 units
D. 6,125 units
Olympia Company produces a single product. Last year, the company had a
net operating income of P92,000 using absorption costing and a net
operating income of P98,600 using variable costing. If the fixed
manufacturing overhead cost was P3.00 per unit for the last two years, and
if production was 18,000 units, then sales in units last year were:
A. 24,600
B. 20,200
C. 15,800
D. 15,000
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