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Variable Costing Income Statement Analysis

This document provides production, sales, and cost data for Anna Manufacturing over a three year period. It asks to prepare income statements for each year using absorption costing and variable costing. First, it asks to compute the product cost per unit for each method, which is P8.00 for absorption costing and P6.00 for variable costing due to the exclusion of fixed overhead costs from the variable costing method.

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Abdulmajed Unda Mimbantas
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69 views1 page

Variable Costing Income Statement Analysis

This document provides production, sales, and cost data for Anna Manufacturing over a three year period. It asks to prepare income statements for each year using absorption costing and variable costing. First, it asks to compute the product cost per unit for each method, which is P8.00 for absorption costing and P6.00 for variable costing due to the exclusion of fixed overhead costs from the variable costing method.

Uploaded by

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

SAMPLE PROBLEM ON VARIABLE COSTING

Anna Manufacturing produces and sells earphones. Its production, sales and cost data for a
three year period are shown below :

Year 1 Year 2 Year 3

Manufacturing costs:
Materials per unit 3.00 3.00 3.00 Labor per unit 2.00 2.00 2.00 Variable overhead per
unit 1.00 1.00 1.00 Fixed overhead total 2,000 2,000 2,000
Selling and administrative costs:
Variable per unit sold 1.50 1.50 1.50 Fixed total 800 800 800 Production in units 1,000
1,000 1,000 Sales in units 1,000 800 1,100 Selling price per unit 15.00 15.00 15.00
Required : Prepare income statements for each year using
1) a bsorption costing 2) variable costing
First, compute the product cost per unit for absorption and variable costing
methods : Product cost per unit- Absorption costing :
Direct materials P3.00
Direct labor 2.00
Variable overhead 1.00
Fixed overhead P 2,000
1,000 units 2.00 P8.00
Product cost per unit- Variable costing:
Direct materials 3.00
Direct labor 2.00
Variable overhead 1.00 P6.00

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