Accounting 11 – Management Accounting 1

Product Costing
Problem 1:
EXMONGDIKAMINAHAL Company began business in 2018. Production for the year was P50,000
units of hairpin, and sales were 48,000 units. Selling price is P1.50 per unit. Costs incurred during
the year were as follows:

Materials P15,000
Direct Labor 7,500
Variable Overhead 12,500
Fixed Overhead 5,000
Variable Selling Expenses 5,760
Fixed Selling and Administrative Expenses 10,000
Total Actual Costs P55,760

Required:
1. Compute the product cost per unit under absorption and variable costing.
2. What was variable Cost of Goods Sold for 2018 under Variable Costing?
3. What was the Cost of Goods Sold for 2018 under Absorption Costing?
4. What was the value of ending inventory for 2018 under variable costing? Under absorption
costing?
5. What was the income for 2018 under variable costing? Under absorption costing?
6. How much fixed overhead was charged to expense in 2018 under variable costing? Under
absorption costing?

Problem 2:
Refer to the given on problem number 1 and compute for the throughput margin and income under
throughput costing.

Problem 3:
Menggay Corporation developed the following standard unit cost at 100% of its normal production
capacity which is 20,000 units per year:
Materials P5
Labor 20
Factory Overhead (80 % Variable) 40
Unit Product Cost P65
The product is sold for P100 per unit. Variable selling and administrative expenses are P6 per unit
sold, and fixed non-manufacturing expenses total P92,000 for the period. During the year, 22,000
units were produced and 23,000 units were sold. There is no work in process beginning and ending
inventories, and finished good inventory is maintained at standard cost, which has not changed
from the preceding year. In the current year, there is a favorable prime cost variance of P8,000 and
an unfavorable variable overhead variance of P12,000. All standard cost variances are written off o
cost of goods sold at the end of the period.

Required:
1. Prepare an income statement on the absorption costing basis.
2. Prepare an income statement on the variable costing basis.
3. Compute and reconcile the difference in operating income for the current year under absorption
costing and variable costing.

MANAGEMENT ACCOUNTING 1 – PRODUCT COSTING 1

 Accounting 11 – Management Accounting 1

Problem 4:
The following information is available for Mineski Company’s new product line:

Sales price per unit P15

Variable manufacturing cost per unit of production 8
Total Annual fixed manufacturing cost 25,000
Variable administrative cost per unit 3
Total annual fixed and administrative expenses 15,000

There was no inventory at the beginning of the year. Normal capacity is 12,500 units. During the
year, 12,500 units were produced and 10,000 units were sold.

Required:
1. Ending Inventory, assuming the use of direct costing.
2. Ending Inventory, assuming absorption costing.
3. Total variable cost charged to expense for the year, assuming the use of direct costing.
4. Total fixed cost charged to expense for the year, assuming the use of absorption costing.

MANAGEMENT ACCOUNTING 1 – PRODUCT COSTING 2