Activity #2
Using a whole yellow paper, answer the following problems.
Part 1: Inventory Valuation Scenarios
Below are five distinct production scenarios. For each, determine the ending inventory amount and cost of
goods sold under:
• Throughput Costing
• Direct (Variable) Costing
• Full Absorption Costing
• Activity-Based Costing
Scenario 1: Electronic Gadgets
An electronics firm runs a batch in November producing 2,000 handheld devices. It sells 1,500 units and
holds 500 in inventory.
• Direct materials: P1,200 per device
• Direct labor: P600 per device
• Variable overhead: P300 per device
• Fixed manufacturing overhead: P2,400,000 for November
ABC cost pools:
• Component assembly: P1,500,000; 5,000 assembly-hours (2.5 AH per device)
• Functional testing: P600,000; 2,000 test-hours (1 TH per device)
• Packaging: P300,000; 1,500 batches (0.5 batch per device)
Required:
• Calculate ending inventory amount and COGS under the four costing methods.
Scenario 2: Metal Fabrication
A job shop produces 500 steel frames in December, sells 400, and keeps 100.
• Direct materials: P6,000 per frame
• Direct labor: P3,000 per frame
• Variable overhead: P1,200 per frame
• Fixed manufacturing overhead: P1,800,000 for December
ABC cost pools:
• Design engineering: P900,000; 150 design-hours (0.3 DH per frame)
• Machine setup: P600,000; 50 setups (0.1 setup per frame)
• Finishing operations: P300,000; 500 finishing-hours (1 FH per frame)
Required:
• Using each costing method, determine ending inventory (100 units) and COGS (400 units).
Scenario 3: Bottled Beverage
A beverage plant produces 10,000 bottles in February, sells 8,000, and has 2,000 in ending inventory.
• Direct materials (ingredients & bottle): P30 per bottle
• Direct labor: P12 per bottle
• Variable overhead: P6 per bottle
• Fixed manufacturing overhead: P30,000 for February
ABC cost pools:
• Bottling line: P180,000; 7,500 bottles processed (0.5 bottle per bottle)
• Labeling station: P60,000; 10,000 labels applied (1 label per bottle)
• Quality control tests: P60,000; 200 tests (0.02 test per bottle)
Required:
• Determine the ending inventory value and cost of goods sold using all four costing approaches.