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SCM Module 1 - Activity

The document discusses cost concepts and classifications relevant for a manufacturing company considering a new product launch. It includes calculations for inventory costs and income statements under both absorption and variable costing for three different companies, ABC, DEF, and GHI, with specific financial data provided. The requirements involve computing costs and income before taxes based on different costing methods.

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Julie Anne Pantoja
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2 views2 pages

SCM Module 1 - Activity

The document discusses cost concepts and classifications relevant for a manufacturing company considering a new product launch. It includes calculations for inventory costs and income statements under both absorption and variable costing for three different companies, ABC, DEF, and GHI, with specific financial data provided. The requirements involve computing costs and income before taxes based on different costing methods.

Uploaded by

Julie Anne Pantoja
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Name: Date:

COST CONCEPTS AND CLASSIFICATIONS

1. A manufacturing company wants to expand its business by introducing a new product.


You have been asked, as a cost accounting student, to help explain the different cost
concepts and cost classifications that management should understand before making this
decision. (Discuss your answer extensively.)

VARIABLE COSTING AND ABSORPTION COSTING

1. ABC Company operated at a normal capacity of 2,000 units in the year 2025. The
company sold 80% of these units at a price of P24 per unit. Manufacturing costs incurred
during the year are as follows:

Manufacturing costs:
Materials 3,000
Labor 2,000
Variable FOH 1,000
Fixed FOH 4,000
Selling and Administrative costs:
VSAE 3,000
FSAE 1,600

Requirements:

a. Compute for the inventory cost per unit under absorption and variable costing.

b. Compute for the ending inventory under absorption and variable costing.

2. DEF Company makes raincoats. Each raincoat sells for P1,500 each. Data for 2025
operation is as follows:

Units:
Beginning Inventory 5
Production 50
Ending Inventory 8
Variable Costs:
Direct Materials 20,000
Direct Labor 15,000
Factory Overhead 8,000
Selling and Administrative 5,000
Fixed Costs:
Factory Overhead 18,000
Selling and Administrative 1,500

Requirements:

a. Prepare the income statement under both absorption and variable costing.

3. GHI Company produces a single product. The following is a cost structure applied to its
first year of operations.

Sales price P15 per unit


Variable costs:
VFOH 4 per unit
VSAE 2 per unit
Fixed costs:
FFOH 25,000
FSAE 14,000

During the first year, GHI Company manufactured 5,000 units and sold 3,800 units. There
was no beginning or ending work-in-process inventory.

Requirements:

a. Compute for the amount of income before taxes if GHI uses absorption costing.
b. Computer for the amount of income before taxes if GHI uses variable costing.

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