ABSORPTION AND VARIABLE COSTING
BSA-2
I.
Joy Sexy, Inc. uses standard costing system for a product it manufactures. For the
year 2019, it established the following standards based on normal production of
1,000 units:
Direct Materials
3 pcs. @ P15/pc.
P 45
Direct Labor
4 hrs. @ P35/hr.
140
Variable overhead
4 hrs. @ P15/hr.
60
Fixed overhead
4 hrs. @ P10/hr.
40
Product Cost per unit
P285
During 2019, the company produced 1,100 units and sold 1,050 units at P500/unit.
Other data regarding the actual results for 2019 operations are as follows:
Direct Materials used
(3,250 pcs @ P16/pc)
P 52,000
Direct Labor
(4,300 hrs @ P35.50/hr)
152,650
Variable Overhead
(4,300 hrs @ P16/hr)
68,800
Fixed overhead
42,000
Variable selling and administrative expenses
11,000
Fixed selling and administrative expenses
15,000
Required:
1. Variance for each product cost element.
2. Net Income under absorption and variable costing.
II.
Information taken from Grille Corporation’s May accounting records are as follows:
Direct Materials used
Direct Labor
Variable Manufacturing overhead
Fixed Manufacturing overhead
Variable Selling and Administrative Expenses
Fixed Selling and Administrative Expenses
Sales Revenues
150,000
80,000
30,000
100,000
51,000
60,000
625,000
Required:
1. Compute the inventoriable costs for the month under absorption and variable
costing.
2. Assume that anticipated and actual production totalled 20,000 units, and that
18,000 units were sold during May. Determine the amount of fixed
manufacturing overhead and fixed selling and administrative costs that would be
expensed for the month under (a) variable costing and (b) absorption costing.
3. Using the same date in no. 2, compute the contribution margin that would be
reported on a variable-costing income statement.