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Tutorial 11 Questions - CHP 8 Var Costing

This document provides tutorial questions and exercises for Chapter 8 on variable costing from the textbook "Managerial Accounting, 10th Edn". It includes two sample problems asking students to calculate unit product costs, prepare income statements, and reconcile net operating income between absorption and variable costing methods. Students are asked four short questions defining key differences between absorption and variable costing, how inventory affects reported income between the two methods, why absorption costing is preferred for pricing, and the difference between observable and hidden quality costs.

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60 views3 pages

Tutorial 11 Questions - CHP 8 Var Costing

This document provides tutorial questions and exercises for Chapter 8 on variable costing from the textbook "Managerial Accounting, 10th Edn". It includes two sample problems asking students to calculate unit product costs, prepare income statements, and reconcile net operating income between absorption and variable costing methods. Students are asked four short questions defining key differences between absorption and variable costing, how inventory affects reported income between the two methods, why absorption costing is preferred for pricing, and the difference between observable and hidden quality costs.

Uploaded by

zu mo
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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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CIA 1004 - Tutorial Questions for:

Tutorial No. 11 – Week Beginning 9 June 2022

Text Book: Hilton, R.W. & Platt, D.E. (2015). Managerial Accounting, 10 th Edn, McGraw-
Hill

Chapter 8: Variable Costing

Questions: 8.1, 8.4, 8.8, 8.13

Exercises: 8.22, 8.24

Extra Questions:

1. The Dean Company produces and sells a single product. The following data refer to the
year just completed:

Beginning inventory ...................................................... 0


Units produced .............................................................. 20,000
Units sold ...................................................................... 19,000

Selling price per unit ..................................................... $350


Selling and administrative expenses:
Variable per unit ......................................................... $10
Fixed (total)................................................................ $225,000
Manufacturing costs:
Direct materials cost per unit ...................................... $190
Direct labor cost per unit ............................................ $40
Variable manufacturing overhead cost per unit ........... $25
Fixed manufacturing overhead (total) ......................... $250,000

Assume that direct labor is a variable cost.

Required:

a. Compute the cost of a single unit of product under both the absorption costing and
variable costing approaches.
b. Prepare an income statement for the year using absorption costing.
c. Prepare an income statement for the year using variable costing.
d. Reconcile the absorption costing and variable costing net operating income figures
in (b) and (c) above.

1
2. Pacht Company, which has only one product, has provided the following data concerning
its most recent month of operations:

Selling price ............................................. $121

Units in beginning inventory .................... 400


Units produced ......................................... 6,800
Units sold ................................................. 6,900
Units in ending inventory ......................... 300

Variable costs per unit:


Direct materials ..................................... $35
Direct labor ........................................... $36
Variable manufacturing overhead .......... $3
Variable selling and administrative ........ $4

Fixed costs:
Fixed manufacturing overhead .............. $197,200
Fixed selling and administrative ............ $96,600

The company produces the same number of units every month, although the sales in
units vary from month to month. The company's variable costs per unit and total fixed
costs have been constant from month to month.

Required:

a. What is the unit product cost for the month under variable costing?
b. Prepare an income statement for the month using the contribution format and the
variable costing method.
c. Without preparing an income statement, determine the absorption costing net
operating income for the month. (Hint: Use the reconciliation method.)

2
8–1. Briefly explain the difference between absorption costing and variable costing

8–4. When inventory increases, will absorption-costing or variable-costing income be


greater? Why?

8–8. Why do proponents of absorption costing argue that absorption costing is preferable as
the basis for pricing decisions?

8–13. Explain the difference between observable and hidden quality costs.

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