QUIZ 2

(1) Vicencio Corporation began its operations on January 1, 200A. It produces a single product
that sells for P13.50 per unit. The company uses an actual (historical) cost system. During
200A, 150,000 units were produced and 135,000 units were sold. There was no work-in-
process inventory at December 31, 200A.

Manufacturing costs and selling and administrative expenses for 200A were as follows:
  Fixed Costs Variable Costs
Raw Materials ---------- P 3.50 per unit produced
Direct Labor ---------- P 2.50 per unit produced
Factory Overhead 195,000 P 1.00 per unit produced
Selling and Administrative 140,000 P 1.20 per unit produced
Total 335,000 P 8.20

What amount would be Vicencio Corporation’s operating income be for 200A using the variable
costing method? 380,500

(2) Using the above problem, the cost of ending inventory using absorption costing is
___________. 124,500

(3) (20) Ward Company has two segments: Audio and Video. Sales for the Audio Segment were
P500,000, and variable costs were 40% of sales. The Video Segment also had sales of P
500,000, but the variable costs were 60% of sales. Fixed costs directly traceable to the Audio
and Video Segments were P 150,000 and P 120,000, respectively. Common fixed costs of P
200,000 were arbitrarily allocated equally to each segment. What was the segment margin of
the Video Segment? 80,000

(4) During January 200X, CPA, Inc. produced 1,000 units of Product D with costs as follows:

Materials 6,000
Labor 3,300
Variable factory overhead 2,500
Fixed factory overhead 1,500
Total manufacturing costs P 13,300

Selling and administrative costs incurred during the month were:

Variable S&A 3,000
Fixed S&A 2,000
Total P 5,000

Selling price per unit P 20.00

What amount should be considered product cost for external reporting purposes? 13.30

(5) Deveza Cookies produces and sells boxed choco cookies. There are 100 pieces of cookies per
box.

The following income statement shows the results of Deveza’s first year of operations. This
income statement was the one included in the company’s annual report to the stockholders:
Sales (600 boxes at P25 per box) 15,000
Less Cost of Goods Sold (600 boxes at P16 per box) 9,600
Gross Margin 5,400
Less Selling & Administrative Expenses 2,400
Income 3,000
Variable and selling administrative expenses is P1.80 per box.
During the year, the company produced 750 boxes. Variable production costs is P 10.50 per
box and fixed manufacturing overhead costs totaled P 4,125.

What is the Company’s variable costing net income? 2,175

(6) Well Company produces single product. Last year, the company’s net operating income
computed by the absorption costing methos was P 25,600, and its operating income computed
by the variable costing method was P 36,400. The company’s unit product cost was P18 under
variable costing and P20 under absorption costing. If the ending inventory is consisted of 2,600
units, the beginning inventory in units must have been _______________. 8,000

(7) During the year, ABS Corporation produced 500 units of new products. The new product’s
variable and fixed manufacturing ocst per unit were P5 and P 3, respectively. At the end of the
period, the new product’s inventory consisted of 80 units. What would be the change in the
peso amount of inventory at the end of the period if absorption costing were used instead of
variable costing? (Amount increase/decrease) 240 increase

(8) ABC Company produces a single product. Last year, the company’s net operating income
computed by the variable costing method was P 30,000. The company’s unit product cost was
P 18 under variable costing and P 20 under absorption costing. During the period, inventory
decreased by 8,000 units. The company’s income under absorption costing must have been
____________. 14,000

QUIZ 3

(1) For numbers 41-44. China Manufacturing Corporation has the following information:
Moving time 8 days
Inspection time 2 days
Processing time 10 days
Storage time 30 days

What is the total amount of value added time? 10 days

(2) Zaire Company is preparing its annual profit plan. As part of its analysis of profitability of
individual products the controller estimates the amount of overhead that should be allocated to
the individual product lines from the information given as follows:

  Wall Mirrors Specialty Windows

 Units produced 25 25
 Materials moves per product li 5 15
 Direct labor hours per unit 200 200
 Budgeted materials handling costs 50,000.00

Under traditional costing system that allocates overhead on the basis of direct labor hours, the
materials handling costs allocated to one unit of wall mirrors would be ____________. 1,000

(3) Using problem in #2, under ABC, the materials handling costs allocated to one unit of wall
mirrors would be ______________. 500

(4) The following data pertain to Spikey Company’s production and sales activites for the month
of November:
 Production 9,000 units
Sales 7,000 units
Standard variable manufacturing costs P 20 per unit
Standard Fixed manufacturing costs P 25 per unit
Selling and administrative expenses (all fixed) P 80,000

Normal capacity is 10,000 units per month. There was no inventory at the beginning of
November. The product sells for P 75 per unit. All costs were incurred as expected. Of the
standard variable manufacturing cost of P 20, P 12 is for materials. Income under throughput
costing is _______________. 15,000

(5) Iran Manufacturing produces three products. Production and cost information show the
following:
  Model F Model A Model Q
  Units produced 1,000 3,000 6,000
 Direct labor hours 2,000 1,000 2,000
 Number of inspection 20 30 50

Using ABC, the inspection costs of P50,000 allocated to each unit of Model F would be
__________. 10

(6) ABC Company makes two products, D and E. D is being introduced this period, whereas E
has been in production for 2 years. For the period about to begin, 1,000 units of each product
are to be manufactured. The only relevant overhead item is the cost of engineering orders. D
and E are expected to require eight and two change orders, respectively. D and E are expected
to require 2 and 3 machine hours, respectively. The cost of a change order is 600.

If ABC Company applies engineering change order cost on the basis of machine hours, the
overhead cost per unit to be assigned to product D is _____________. 2.40