Bong K. Day opened Bong Creations, Inc. a small, manufacturing company at the beginning of the year. Getting the company through its first year of operations placed a considerable strain on Mr. Day's personal finances. The following income statement for the first quarter of the current year was prepared by a friend who just have completed managerial accounting in his BSA program. Bong Creations, Inc. Income Statement For quarter ended March 31 2021 Sales (28,000 units) Variable Cost of Sales: Production Finished good invty. (end) Variable cost of sales Variable selling and admin. Total variable cost and expenses Contribution Margin Fixed Cost and Expenses Manufacturing Overhead Selling and Admin Net Operating Income Variable cost per unit: Direct materials P 3.50 Direct labor 12.00 P495,000 33,000 P462,000 168,000 Mfg. Overhead 1.00 Selling and admin 6.00 P300,000 200,000 Bong K. Day is discourage of the loss shown for the current year since he had planned to use the statement as support for a bank loan. A CPA insists that the company should be using absorption costing rather than variable costing. At this point, the company is manufacturing only one product, a swimsuit. Production and cost data relating to the swimsuit for the first quarter follows: Units produced Units sold P1,120,000 630,000 490,000 ady source was downloaded by 100000845940577 from CourseHero.com on 08-18-2022 10:06:53 GMT-05:00 www.courschero.com/file/107001069/MANACC330Test Variable-Costingpdf/ 500,000 (P 10,000) Fixed mfg. Overhead P300,000 Fixed selling & admin 200,000 30,000 28,000 Required: 1. Compute for the following: a. Unit product cost under variable costing and under absorption costing b. Redo the company's income statement (showing the value of ending inventory) for the first quarter using absorption costing
Bong K. Day opened Bong Creations, Inc. a small, manufacturing company at the beginning of the year. Getting the company through its first year of operations placed a considerable strain on Mr. Day's personal finances. The following income statement for the first quarter of the current year was prepared by a friend who just have completed managerial accounting in his BSA program. Bong Creations, Inc. Income Statement For quarter ended March 31 2021 Sales (28,000 units) Variable Cost of Sales: Production Finished good invty. (end) Variable cost of sales Variable selling and admin. Total variable cost and expenses Contribution Margin Fixed Cost and Expenses Manufacturing Overhead Selling and Admin Net Operating Income Variable cost per unit: Direct materials P 3.50 Direct labor 12.00 P495,000 33,000 P462,000 168,000 Mfg. Overhead 1.00 Selling and admin 6.00 P300,000 200,000 Bong K. Day is discourage of the loss shown for the current year since he had planned to use the statement as support for a bank loan. A CPA insists that the company should be using absorption costing rather than variable costing. At this point, the company is manufacturing only one product, a swimsuit. Production and cost data relating to the swimsuit for the first quarter follows: Units produced Units sold P1,120,000 630,000 490,000 ady source was downloaded by 100000845940577 from CourseHero.com on 08-18-2022 10:06:53 GMT-05:00 www.courschero.com/file/107001069/MANACC330Test Variable-Costingpdf/ 500,000 (P 10,000) Fixed mfg. Overhead P300,000 Fixed selling & admin 200,000 30,000 28,000 Required: 1. Compute for the following: a. Unit product cost under variable costing and under absorption costing b. Redo the company's income statement (showing the value of ending inventory) for the first quarter using absorption costing
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Bong K. Day opened Bong Creations, Inc. a small, manufacturing
company at the beginning of the year. Getting the company through its first
year of operations placed a considerable strain on Mr. Day's personal
finances. The following income statement for the first quarter of the current
year was prepared by a friend who just have completed managerial
accounting in his BSA program.
Bong Creations, Inc.
Income Statement
For quarter ended March 31 2021
Sales (28,000 units)
Variable Cost of Sales:
Production
Finished good invty. (end)
Variable cost of sales
Variable selling and admin.
Total variable cost and expenses
Contribution Margin
Fixed Cost and Expenses
Manufacturing Overhead
Selling and Admin
Net Operating Income
Variable cost per unit:
Direct materials P 3.50
Direct labor
12.00
P495,000
33,000
P462,000
168,000
Mfg. Overhead
1.00
Selling and admin 6.00
P300,000
200,000
Bong K. Day is discourage of the loss shown for the current year
since he had planned to use the statement as support for a bank loan. A
CPA insists that the company should be using absorption costing rather
than variable costing. At this point, the company is manufacturing only
one product, a swimsuit. Production and cost data relating to the swimsuit
for the first quarter follows:
Units produced
Units sold
P1,120,000
630,000
490,000
ady source was downloaded by 100000845940577 from CourseHero.com on 08-18-2022 10:06:53 GMT-05:00
www.courschero.com/file/107001069/MANACC330Test Variable-Costingpdf/
500,000
(P 10,000)
Fixed mfg. Overhead
P300,000
Fixed selling & admin 200,000
30,000
28,000
Required:
1. Compute for the following:
a. Unit product cost under variable costing and under absorption costing
b. Redo the company's income statement (showing the value of ending
inventory) for the first quarter using absorption costing
c. Reconcile the net operation income of variable costing and absorption
costing
d. During the second quarter of operation, the company again produced
30,000 units and sold also 30,000 units. (no change in total fixed costs)
1. Prepare income statements for second quarter of 2021 using both
absorption and variable costing (show value of ending inventory)
2. Reconcile the operating income of using variable costing and
absorption costing
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