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Ace Corporation: Names of Students: Section: BSA601 Date Activity N

1) Absorption costing assigns all manufacturing costs, both fixed and variable, to inventory. It results in net income of P138,000. 2) Variable costing separates fixed and variable costs, assigning only variable costs to inventory. It results in net income of P115,000. 3) Throughput costing considers only direct material costs and period costs, ignoring manufacturing costs. It results in net income of P50,000.

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652 views3 pages

Ace Corporation: Names of Students: Section: BSA601 Date Activity N

1) Absorption costing assigns all manufacturing costs, both fixed and variable, to inventory. It results in net income of P138,000. 2) Variable costing separates fixed and variable costs, assigning only variable costs to inventory. It results in net income of P115,000. 3) Throughput costing considers only direct material costs and period costs, ignoring manufacturing costs. It results in net income of P50,000.

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Goose Chan
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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BM2021

Names of students: Section: BSA601 Date

ACTIVITY

Ace Corporation n
Ace Corporation has the following information in its first year of operations in 201A:

Units produced 20,000


Units sold 19,000

Selling price per unit P150


Direct material costs 20
Direct labor 15
Variable manufacturing overhead 50
Variable selling costs 20

Fixed manufacturing costs P460,000


Fixed administrative costs 280,000

Required:
Prepare an income statement under (1) absorption costing, (2) variable costing, and (3) throughput
costing.

Units Produced 20,000


Less: Units Sold 19,000
Units Unsold 1,000

Direct Material Costs P 20.00


Direct Labor 15.00
Variable Manufacturing Overhead 50.00
Variable Manufacturing Costs P 85.00

Fixed Manufacturing Costs P 460,000.00


Divided by: Units Produced 20,000
Total P 23.00
Add: Variable Manufacturing Costs P 85.00
Cost of Goods Sold per unit P 108.00
Units sold 19,000
Cost of Goods Sold P 2,052,000.00

07 Activity 1 *Property
of STI
BM2021

Names of students: Section: BSA601 Date

Ace Corporation
Income Statement (Absorption Costing)
December 31, 201A

Sales (19,000 x P150) ₱ 2,850,000.00


Less: Cost of Goods Sold (19,000 x P108) 2,052,000.00
Gross Profit ₱ 798,000.00
Less: Selling and Administrative Expenses
Variable Selling (19,000 x P 20) ₱ 380,000.00
Fixed administrative 280,000.00 660,000.00
Net Income ₱ 138,000.00

The cost of goods sold by P 108 per unit is computed as the sum of variable and fixed manufacturing
costs per unit [P 85 + (P460,000/20,000)]. The cost of ending inventory will be P 108,000.00 (P 108 x
1,000 units unsold).

Ace Corporation
Income Statement (Variable Costing)
December 31, 201A

Sales (19,000 x P 150) ₱ 2,850,000.00


Less: Variable Costs
Cost of Goods Sold (19,000 x P 85) ₱ 1,615,000.00
Sellings Costs (19,000 x P 20) 380,000.00 1,995,000.00
Contribution Margin ₱ 855,000.00
Less: Fixed Costs
Manufacturing Costs 460,000.00
Administrative Costs 280,000.00 740,000.00
Net Income ₱ 115,000.00

The income statement under variable costing separates variable costs and fixed costs and shows a
contribution margin instead of a gross profit, as shown under absorption costing. The cost of ending
inventory under variable costing is P 85,000 (P 85 x 1000 units unsold).
07 Activity 1 *Property
of STI
BM2021

Names of students: Section: BSA601 Date

As shown in the two (2) income statements, the difference between the net income of the two (2)
methods is P 23,000. This is also the difference between the cost of ending inventory and comprises the
fixed manufacturing overhead in ending inventory of P 23,000 (P23 x 1,000)

Net Income (Absorption Costing P 138,000.00


Net Income (Variable Costing) (115,000.00)
Difference Between the Net Income P 23,000.00

Ace Corporation
Income Statement (Throughput Costing)
December 31, 201A

Sales (19,000 x P 150) ₱ 2,850,000.00


Less: Direct Materials (19,000 x P20) 380,000.00
Throughput Margin ₱ 2,470,000.00
Less:
Variable Manufacturing Costs (20,000 x P 65) ₱ 1,300,000.00
Variable Selling Expenses (19,000 x P 20) 380,000.00
Fixed Manufacturing Costs 460,000.00
Fixed Administrative Expenses 280,000.00 ₱ 2,420,000.00
Net Income ₱ 50,000.00

07 Activity 1 *Property
of STI

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