Variable Costing and Absorption Costing

Problem 1
PUNP Co. has the following data pertaining to its only product:
Selling price per unit P 60
Direct materials 18
Direct labor 15
Variable Overhead 6
Fixed overhead 120,000
Variable selling and administrative 3
Fixed selling and administrative 30,000
Assume a normal capacity of 10,000 units and no spending variance was incurred.

Required:
1. Determine the unit cost under:
a. Throughput costing
b. Variable costing
c. Absorption costing
2. Considering the following production and sales information for the first four years of operation:
Year 1 Year 2 Year 3 Year 4
Produced 15,000 15,000 15,000 16,500
Sold 13,500 15,750 15,000 15,000
Compute the value of the ending inventory and net profit under the following:
a. Throughput costing
b. Variable costing
c. Absorption costing
3. Reconcile the income under variable and absorption costing for the following different periods presented.

Problem 2
SLU Co. uses standard cost accounting system. Data for the last fiscal year are as follows.
Beginning inventory of finished goods 100 units
Production during the year 700 units
Sales 750 units
Ending inventory of finished goods 50 units
Cost information:
Product selling price P 200 per units
Standard variable manufacturing cost 90 per units
Standard fixed manufacturing cost 20 per units*
Budgeted selling price and administrative cost (all fixed) P 45,000
*Denominator level of activity is 750 units for the year.
There were no price, efficiency, or spending variance for the year, and actual selling and administrative expenses equals
the budget amount. Any volume variance is written off to cost of goods sold in the year incurred. There is no work in
process inventories.

Required:
Compute the value of the ending inventory and operating income under the following:
a. Variable costing
b. Absorption costing
Problem 3
UC Co. records for the year ended December 31 showed that there were no work in process inventories at the beginning
and end of the year.
Net sales P 700,000
Cost of goods manufactured
Variable P 315,000
Fixed P 157,500
Operating expenses
Variable P 49,000
Fixed P 70,000
Units manufactured 70,000 units
Units sold 60,000 units
Finished goods inventory, Jan. 1 None

Required:
Compute the value of the ending inventory and operating income under the following:
a. Variable costing
b. Absorption costing

1. For the most recent year, Amazon Company’s net income computed by the absorption costing method was P7,400,
and its net income computed by the variable costing method was P10,100. The Company units product cost was P17
under variable costing and P22 under absorption costing. If the ending inventory consisted of 1,460 units, the beginning
inventory must has been:

2. For the most recent year, Alibaba Company’s net income computed by the absorption costing method was P90,000,
and its net income computed by the variable costing method was P84,000. The fixed overhead application rate P6 per
unit. There were no beginning inventories. If 22,000 units were produced last year, then sales for last year were:

3. Casio Co. produces a single product. Last year, the company had net operating income of P50,000 using variable
costing. Beginning and ending inventories were 13,000 units and 18,000 units, respectively. If the fixed manufacturing
overhead cost was P2 per unit, what would have been the net operating income using absorption costing?

4. Sharp Co. produces a single product had a net operating income of P85,500 using variable costing and net operating
income of P90,000 using absorption costing. Total fixed manufacturing overhead was P150,000, and production was
100,000 units. How many are the difference between beginning inventory and ending inventory? (Indicate if increased
by or decrease by)