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# chapter-4 - This Accounting Materials are brought to you by...

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This Accounting Materials are brought to you by www.everything.freelahat.com CHAPTER 4 VARIABLE COSTING [Problem 1] AC VC 1. Direct materials P1,200 P1,200 Direct labor 1,400 1,400 Var OH 500 500 FxOH (P4,000,000/1,000) 4,000 - Unit product costs P7,100 P3,100 2. AC VC Sales (800 x P12,000) P9,600,000 P9,600,000 Var CGS (800 x P3,100) (2,480,000) (2,480,000) Fixed OH (800 x P4,000) (3,200,000) (4,000,000) Variable exp (800 x P200) ( 160,000) ( 160,000) Fixed exp (2,000,000) (2,000,000) Operating income P1,760,000 P 960,000 3. AC VC Ending inventory (200 x P7,100) P1,420,000 (200 x P3,100) P620,000 4. Productions 1,000 units Less: Sales 800 units Change in inventory 200 units x UFxOH P4,000 Change in income P800,000 [Problem 2] 1a. AC VC Direct materials P15 P15 Direct labor 7 7 Var OH 2 2 Fx OH (P640,000/40,000) 16 - Unit product costs P40 P24

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This Accounting Materials are brought to you by www.everything.freelahat.com 1b. AC VC Sales (35,000 x P60) P2,100,000 P2,100,000 Var CGS (35,000 x P24) ( 840,000) ( 840,000) Fx OH (35,000 x P16) ( 560,000) ( 640,000) Var exp (35,000 x .05 x P60 ) ( 105,000) ( 105,000) Fx exp ( 560,000) ( 560,000) Operating income P 35,000 P( 45,000) 1c. AC VC Ending inventory (5,000 x P40) P200,000 (5,000 x P24) P120,000 2. Difference in net income [P35,000 - (P45,000)] P80,000 Change in inventory (40,000 - 35,000) 5,000 units x Unit Fx OH __ P16 Change in income P80,000 [Problem 3] 1. Unit var cost (P80,000/40,000) P2.00 [or P1 + P0.80 + P0.20] Unit Fx OH (P75,000 / 50,000) 1.50 Unit cost - absorption costing P3.50 2. Sales P200,000 Less: CGS (40,000 x P3.50) 140,000 Gross profit 60,000 Less: Operating expenses (P30,000 + P20,000) 50,000 Net income P 10,000 3. Change in net income [P10,000 - (5,000)] P15,000 Change in inventory ( 50,000 - 40,000) 10,000 units X Unit Fx OH Rate 1.50 Change in net income P15,000
This Accounting Materials are brought to you by www.everything.freelahat.com [Problem 4] 1. Variable Costing Income Statements May June Sales P1,040,000 P1,360,000 Less Variable CGS: Beginning inventory 0 88,000 Add: Var CGM (30,000 x P22) 660,000 660,000 TGAS 660,000 748,000 Less: Ending inventory 88,000 0 Variable CGS 572,000 748,000 Manufacturing Margin 468,000 612,000 Less: Variable express (26,000 x P3) 78,000 (34,000 x P3) ____ ___ __ 102,000 Contribution Margin _390,000 510,000 Less Fixed costs and expenses: Fixed overhead 240,000 240,000 Fixed expenses __ 180,000 __ 180,000 Total 420,000 420,000 Net Income (loss) P( 30,000) P 90,000 2. Change in net income accounted for as follows: May June Change in net income [(P2,000) - (-P30,000)] P32,000 (P58,000 - P90,000) P32,000 Change in inventory (30,000 - 26,000) 4,000 units (30,000 - 34,000) 4,000 units x Unit Fx OH P8 _ P8 __ Change in net income P32,000 P32,000 [Problem 5] 1. AC VC Direct materials P50 P50 Direct labor 36 36 Var Overhead 4 4 Fx Overhead (P240,000/6,000 units) __ 40 ____ Unit inventoriable costs P130 P 90

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This Accounting Materials are brought to you by www.everything.freelahat.com 2. Normal capacity 6,000 units Less: Actual capacity 5,500 Capacity (volume) variance in units 500 UF X Unit Fx OH P 40 Capacity variance P20,000 UF 3. AC VC Var CGS (5,200 x P130 ) P676,000 P468,000 (5,200 x P90) Fx overhead - 240,000 Net Mat. Var – unfavorable 12,000 UF 12,000 UF Net DL variance - favorable ( 5,000) F ( 5,000) F Net Var OH Var - favorable ( 2,500) F ( 2,500) F Capacity variance - unfavorable 20,000 UF ______- _ Cost of good sold - at actual P700,500 P712,500 4. AC VC Sales (5,200 x P 300) P1,560,000 P1,560,000 Costs of good sold - at actual ( 700,000) ( 712,500) Var S and A expenses (P1,560,000 x 12%) ( 187,200) ( 187,200) Fixed S and A expenses (160,000) ( 160,000) Operating income P 512,300 P 500,300 5. Change in income (P512,300 - P520,3020) P12,000 Change in inventory (5,500 - 5,200) 300 units X Unit Fx OH P 40 Change in net income P12,000 [Problem 6] Bark Manufacturing Company Direct Costing Income Statement For the Year Ended, December 21,2006 Sales (90,000 x P12) P1,080,000 Less: Cost of Goods Sold Beginning Inventory P 0 Add: Var CGM (100,00 x P4.00) 400,000 Total goods available for sale 400,000 Less: Ending Inventory (10,000 x P4.00) 40,000 380,000 Manufacturing margin 700,000 Less: Variable Expenses (90,000 x P0.20) 18,000
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