Asistensi ke 9 – VARIABLE COSTING
ABM 2017
Problem 1
1. What is variable costing and absorption costing?
2. What makes these costing difference?
3. What are the advantages and disadvantages of implementing variable costing and absorption
costing?
Problem 2
ABC Company manufactures a professional-grade vacuum cleaner and began operations in 2014. For 2014,
ABC Company budgeted to produce and sell 20,000 units. The company had no price, spending, or
efficiency variances and writes off production-volume variance to cost of goods sold. Actual data for 2014
are given as follows:
Units produced
18,000
Units sold
17,500
Selling price
$450
Variable costs:
Manufacturing cost per unit
produced
Direct materials
$30
Direct manufacturing labor
$25
Manufacturing overhead
$60
Marketing cost per unit sold
$45
Fixed costs:
Manufacturing costs
$1,200,000
Administrative costs
$965,450
Marketing
$1,366,400
Required:
1. Prepare a 2014 income statement for ABC Company using variable costing.
2. Prepare a 2014 income statement for ABC Company using absorption costing.
3. Explain the differences in operating incomes obtained in requirements 1 and 2.
Problem 3
ABM Corp has just completed its first year of operation. The unit cost on a normal accounting basis are as
follow:
Asistensi ke 9 – VARIABLE COSTING
ABM 2017
Manufacturing cost (per unit)
- Direct Material ( 5lbs @$2)
- Direct Labor (0.5 hr @$20)
- Variable Overhead (0.5 hr @$5)
- Fixed Overhead (0.5 hr @$8)
TOTAL
Selling and administration costs
- Variable
- Fixed
During the year, ABC Corp had the following activity:
Unit produced
Unit sold
Unit selling price
DLH worked
$10
$10
$2.5
$4
$26.5
$3/unit
$ 250.000
22.000
20.500
$40
11.000
ABM Corp used an actual activity level of 11.000 DLH to compute the overhead rates
Required:
a) Compute the unit cost using absorption costing and variable costing
b) Compute the amount of ending FG Inventory using both of method
c) Prepare absorption costing income statement
d) Prepare variable costing income statement
e) In the following year (the second year of operation), the company produced 25.000 unit but only
sell 24.600 units. Based on this information, prepare absorption and variable costing income
statement (assuming the company use FIFO an the cost and selling price remains the same)
f) Reconcile the differences in your point e
Homework
Jeka company produces and sells a product for $30.00 per unit. In 2014, 100.000 units were sold to
beginning inventory, 50.000 units were in ending inventory, and 250.000 units were sold. Unit cost in
beginning inventory is the same as cost per unit produced during the year. Other information for the year
includes:
Direct Materials
Direct manufacturing Labor
Variable Manufacturing Cost
Sales Commissions
Fixed manufacturing costs
Administrative expenses, all fixed
: $11 per unit
: $ 2.25 per unit
: $ 1.75 per unit
: $3 per unit
: $400.000 per year
: $150.000 per year
Required:
1. Prepare income statements under variable and absorption costing for the year ended December
31, 2014.
2. Reconcile and explain the difference in operating income between two methods.