Absorption

Revenue 700,000,000
COGS
- Beg. Inventory -
- Direct Materials 60,000,000
- Direct Labor 180,000,000
- Var. Manuf 120,000,000
- Allocated Fixed Manuf 150,000,000
COGAS 510,000,000
- Deduct End. Inventory -34,000,000
- Adjustment for PVV 25,000,000
COGS 501,000,000
Gross Margin 199,000,000
Fixed S&A 40,000,000
Var. Selling Expense 56,000,000
Operating Income 103,000,000

2 Budgeted fixed manufacturing overhead rate for 2015 = Rp 175,000,000 / 35,000 = Rp 5,000
OI difference of = 10,000,000
(30,000 - 28,000) × Rp 5,000 = Rp 10,000,000 (favors absorption method)

Ketika production > sales, metode absorption costing menghasilkan OI yang lebih tinggi akibat fixed MOH y
Ending inventory menyerap sebagian dari fixed MOH (inv. cost / unit = variable + fixed cost) dan mengu
Karena beban COGS lebih kecil, maka OI akan lebih tinggi.
 Variable Information
Beg. Inventory
Revenue 700,000,000 Produced
COGS Sold
- Beg. Inventory - End. Inventory
- Direct Materials 60,000,000 Capacity
- Direct Labor 180,000,000
- Var. Manuf 120,000,000
VCOGAS 360,000,000 *Absorption
- Deduct End. Inventory -24,000,000 DM Cost / unit
VCOGS 336,000,000 DL Cost / unit
Var. Selling Expense 56,000,000 Var. Manuf Cost
Contribution Margin 308,000,000 Fix. Manuf Cost
Fixed Manufacturing 175,000,000 Inv. Cost / unit
Fixed S&A 40,000,000
Operating Income 93,000,000 *Variable
DM Cost / unit
DL Cost / unit
35,000 = Rp 5,000 Var. Manuf Cost
Inv. Cost / unit

kan OI yang lebih tinggi akibat fixed MOH yang menjadi bagian dari ending inventory.
st / unit = variable + fixed cost) dan mengurangi beban COGS di periode tersebut.
GS lebih kecil, maka OI akan lebih tinggi.
 0 Fixed S&A 40,000,000
30,000 Fixed manuf cost 175,000,000
28,000 DM cost / unit 2,000
2,000 DL cost / unit 6,000
35,000 Direct var. manuf cost / unit 4,000
Direct var. selling cost / unit 2,000
Selling price / unit 25,000

2,000
6,000
4,000
5,000
17,000

2,000
6,000
4,000
12,000
1. BEP Q and BEP Revenue
1 Hakau 3 Siao Mai Total
SP 3.4 4.8 8.2
VC 2.6 3.9 6.5
CM 0.8 0.9 1.7

BEP Q = FC/CM bundle

BEP Q = $34.000/$1,7
BEP Q = 20,000
Q Hakau = 20.000 Hakau
Q Siao Mai = 60.000 Siao Mai

BEP revenue = BEP Q x SP bundle

BEP revenue = 20.000 x $8,2
BEP revenue = 164,000

2. Q and MoS if OI = $136.000

Q= (FC + Targeted OI)/CM bundle
Q= ($34.000 + $136.000)/$1,7
Q= 100,000
Q Hakau = 100.000 Hakau
Q Siao Mai = 300.000 Siao Mai

Revenue = Q x SP bundle
Revenue = 100.000 x $8,2
Revenue = 820,000

MoS = Targeted Revenue - BEP Revenue

MoS = $820.000 - $164.000
MoS = 656,000

3. Q and MoS if NI = $136.000

Q= (FC + Targeted OI)/CM bundle
Q= (FC + NI/(1-Tax rate))/CM bundle
Q= ($34.000 + $136.000/(1-20%))/$1,7
Q= 120,000
Q Hakau = 120.000 Hakau
Q Siao Mai = 360.000 Siao Mai

Revenue = Q x SP bundle
Revenue = $120.000 x $8,2
Revenue = 984,000

MoS = Targeted Revenue - BEP Revenue

MoS = $984.000 - $164.000
MoS = 820,000

4. BEP Q and BEP Revenue (What-if Analysis)

1 Hakau 3 Siao Mai Total
SP 3.4 4.8 8.2
VC 2.34 3.51 5.85
 CM 1.06 1.29 2.35

BEP Q = FC/CM bundle

BEP Q = ($34.000 + $83.500)/$2,35
BEP Q = 50,000
Q Hakau = 50.000 Hakau
Q Siao Mai = 150.000 Siao Mai

BEP Revenue = BEP Q x SP bundle

BEP Revenue = 50.000 x $8,2
BEP Revenue = 410,000

5. BEP Q and BEP Revenue (What-if Analysis)

1 Hakau 1 Siao Mai Total
SP 3.4 1.6 5
VC 2.6 1.3 3.9
CM 0.8 0.3 1.1

BEP Q = FC/CM bundle

BEP Q = ($34.000 + $54.000)/$1,1
BEP Q = 100,000
Q Hakau = 100.000 Hakau
Q Siao Mai = 100.000 Siao Mai

BEP Revenue = BEP Q x SP bundle

BEP Revenue = 100.000 x $8,2
BEP Revenue = 500,000
 20%
Known:
Input Price
Price Basis
Direct Materials
Cloth Rp30.00 per yard
Wood Rp65.00 per board foot
Direct Manufactu Rp45.00 per DLH

Input Quantities per unit of output

Regular High-end
Direct Materials
Cloth 0.8 yards 1.2 yards
Wood 0 b.f. 2 b.f.
DMLH 2.5 hours 3 hours
Setup-hours per 1 hours 2 hours

Inventory information, DM
Cloth Wood
Beginning invent 85 115
Target ending in 150 125
Cost of beginnin Rp5,100,000 Rp14,950,000

Sales and inventory information, finished goods

Regular High-end
Expected sales in 825 900
Selling price Rp325.00 Rp375.00
Target ending inv 85 100
Beginning invento 75 120
Beginning invent Rp10,000,000 Rp22,000,000

Cost Type Denominator Rate Basis

Manufacturing
Setup Setup-hours Rp175.00 per setup-hour
Processing DML Rp18.00 per DMLH
Inspection Number of pairs Rp12.00 per pair
A. REVENUE BUDGET
Price Quantity Total Revenue
Regular Rp325.00 825 Rp268,125,000
High-end Rp375.00 900 Rp337,500,000
Rp605,625,000

B. PRODUCTION BUDGET
Regular High-end
Budgeted unit sales 825 900
Ending Inventory Required 85 100
Unit sales required 910 1000
Beginning inventory 75 120
Unit sales to produced 835 880

C. DIRECT MATERIAL USAGE AND PURCHASED

DIRECT MATERIAL USAGE

Physical Cost Units Cloth Wood
Direct material for regular 668 0
Direct material for high-end 1056 1760
Total Direct Material Required 1724 1760
Beginning 85 115
Total Direct Material Purchased 1639 1645

Physical Cost Budget Cloth Wood

Available Beginning DM Rp5,100,000 Rp14,950,000
DM to be purchased Rp49,170,000 Rp106,925,000
Total DM to be purchased Rp54,270,000 Rp121,875,000 Rp176,145,000

DIRECT MATERIAL PURCHASED

Cloth Wood
DM to be used 1724 1760
Total ending DM 150 125
DM Required 1874 1885
Beginning DM 85 115
DM Purchased in units 1789 1770
DM Purcahes in price Rp53,670,000 Rp115,050,000 Rp168,720,000
D. DIRECT MATERIAL LABOR HOURS

Product Per unit Quantity Hours Required Wages

Regular 2.5 835 2087.5 Rp45.00
High-end 3 880 2640 Rp45.00

E. MANUFACTURING OVERHEAD COST

Quantity Batch Set-up hours

Regular 835 8.35 16.7
High-end 880 8.8 26.4

Cost Rate Regular High-end Total

Setup Rp175.00 Rp2,922,500 Rp4,620,000 Rp7,542,500
Processing Rp18,000.0 Rp37,575,000 Rp47,520,000 Rp85,095,000
Inspection Rp12,000.0 Rp10,020,000 Rp10,560,000 Rp20,580,000
Rp113,217,500

F. BUDGETED UNIT COST OF ENDING FINISHED GOODS

Regular High-end
DM
Cloth Rp24,000.00 Rp36,000.00
Wood Rp- Rp130,000.00
DL Rp112,500.00 Rp135,000.00
MOH
Setup Rp3,500.00 Rp5,250.00
Processing Rp45,000.00 Rp54,000.00
Inspection Rp12,000.00 Rp12,000.00
Total Rp197,000.00 Rp372,250.00

G. ENDING INVENTORY BUDGET

Regular Rp16,745,000
High-end Rp37,225,000
Total Inventory Rp53,970,000
 H. COGS BUDGET

Total DML Available beginning inventory Rp32,000,000 Regular + High-end

Rp93,937,500 DM used Rp176,145,000
Rp118,800,000 DL used Rp212,737,500
Rp212,737,500 MOH used Rp113,217,500
COGAS Rp534,100,000
Ending Inventory Rp53,970,000
COGS Rp480,130,000

I . INCOME STATEMENT

Revenue Rp605,625,000
COGS Rp480,130,000
Gross Profit Margin Rp125,495,000
ar + High-end
1 Cash Collection
December
Cash sales 83,000
Cash collected from credit sales in:
-October 72,000
-November 315,000
-December 120,000
Total cash collected in December 590,000

2 Cash Disbursement for Merchandise

December
Cash paid from purchase in:
-November 161,000
-December 84,000
Total cash disbursed for merchandise purchased 245,000

3 Cash Budget
December
Cash beginning balance 40,000
Cash collected from customers 590,000
Total cash available 630,000
Cash disbursements for:
- Merchandise inventories purchased 245,000
- Selling and administrative expenses 380,000
- Marketing expense 76,000
- Dividend payment 9,000
Total cash disbursement 710,000
Minimum cash balance 20,000
Total cash needed 730,000
Cash excess (deficiency) -100,000
Financing needed:
Borrowing 100,000
Total effect of financing 100,000
Cash ending balance 20,000
1a Direct Materials Variances
Actual Costs Materials Purchased Actual Input Qty
Incurred Price Variance * Budgeted Price
171,000,000 9,000,000 U 162,000,000

1b Direct Labor Variances

Actual Costs Actual Input Qty
Incurred Price Variance * Budgeted Price
131,250,000 5,250,000 U 126,000,000

1c Variable Manufacturing Overhead Variances

Actual Costs Actual Input Qty
Incurred Spending Variance * Budgeted Rate
80,500,000 1,750,000 U 78,750,000

1d Fixed Manufacturing Overhead Variances

Actual Costs Regardless of
Incurred Spending Variance Output Level
30,300,000 300,000 U 30,000,000

2 Comments:
DM: Zeno paid more, material usage is more efficient.
DL: Zeno paid more, but the workers were less efficient.
VMOH: Zeno spent more, but did not make it more efficient.
FMOH: Zeno spent less, but there was an underallocation of fixed overhead costs.
Possible explanations:
DM: increased in DM prices; favourable efficiency variance is probably because of lack of accuracy w
the budget
DL: the company paid a lot more (e.g. due to wage increase) but the workers are untrained
VMOH: prices of variable overhead increased; workers are less skilled than expected in using machi
related from unfavourable results of DL variances); less maintenance
FMOH: actual prices of fixed-cost pool increased; external factors (e.g. decline in demand); supply f
production stoppage or machine breakdowns)
Note: other explanations may apply as long as they do not contradict with each other.

Price Var. Efficiency Var. Total Var.

DM U F U
DL U U U
Spending Var. Efficiency Var. Total Var.
Var OH U U U
Spending Var. Prod. Vol. Var. Total Var.
Fix OH U U U
 Actual Input Qty Materials Used
* Budgeted Price Efficiency Variance Flexible Budget
85,500,000 4,500,000 F 90,000,000

Efficiency Variance Flexible Budget

6,000,000 U 120,000,000

Actual Output * Actual Budgeted

Efficiency Variance Budgeted Rate Never a Variance Rate
3,750,000 U 75,000,000 - - 75,000,000

Regardless of Actual Output *

Never a Variance Output Level Prod. Vol. Variance Budgeted Rate
- - 30,000,000 5,000,000 U 25,000,000

ead costs.
because of lack of accuracy when preparing
rkers are untrained --> OPEN
han expected in using machines (also QUESTION.
FEEL FREE TO
decline in demand); supply factors (e.g. MARK YOUR
STUD'S PAPER
th each other. ACCORDING TO
WHAT YOU
TOUGHT THEM
IN CLASS
1a Direct Materials Variances
Actual Costs Materials Purchased Actual Input Qty
Incurred Price Variance * Budgeted Price
171,000,000 9,000,000 U 162,000,000

1b Direct Labor Variances

Actual Costs Actual Input Qty
Incurred Price Variance * Budgeted Price
131,250,000 5,250,000 U 126,000,000
Total 11,250,000 U

1c Variable Manufacturing Overhead Variances

Actual Costs Actual Input Qty
Incurred Spending Variance * Budgeted Rate
80,500,000 1,750,000 U 78,750,000
Total 5,500,000 U

1d Fixed Manufacturing Overhead Variances

Actual Costs Regardless of
Incurred Spending Variance Output Level
30,300,000 300,000 U 30,000,000
Total 5,300,000 U
 Actual Input Qty Materials Used
* Budgeted Price Efficiency Variance Flexible Budget
85,500,000 4,500,000 F 90,000,000

Efficiency Variance Flexible Budget

6,000,000 U 120,000,000

Actual Output * Actual Budgeted

Efficiency Variance Budgeted Rate Never a Variance Rate
3,750,000 U 75,000,000 - - 75,000,000

Regardless of Actual Output *

Never a Variance Output Level Prod. Vol. Variance Budgeted Rate
- - 30,000,000 5,000,000 U 25,000,000
1&2 COAT
Flexible Budget:
Actual units of all product types sold x
Actual sales mix x
Budgeted CM per unit

104,000 48.08% $ 9,000

$ 450,000,000

Sales-mix variance

GLOVES
Flexible Budget:
Actual units of all product types sold x
Actual sales mix x
Budgeted CM per unit

104,000 51.92% $ 8,000

$ 432,000,000

Sales-mix variance

TOTAL SALES-VOLUME VARIANCE $ 34,000,000 (F)

TOTAL SALES-MIX VARIANCE $ 80,000 (F)

TOTAL SALES-QUANTITY VARIANCE $ 33,920,000 (F)

3 Actual market size x

 Actual market share x
Budgeted CM per composite unit
for budgeted mix

320,000 32.50% $ 8,480

$ 881,920,000

Market-share varian
 Actual units of all product types sold x
Budgeted sales mix x
Budgeted CM per unit

104,000 48.00% $ 9,000

$ 449,280,000

$ 720,000 (F) $ 17,280,000

Sales-mix variance Sales-quantity variance

$ 18,000,000 (F)
Sales-volume variance

Actual units of all product types sold x

Budgeted sales mix x
Budgeted CM per unit

104,000 52.00% $ 8,000

$ 432,640,000

$ 640,000 (U) $ 16,640,000

Sales-mix variance Sales-quantity variance

$ 16,000,000 (F)
Sales-volume variance

Actual market size x

 Budgeted market share x
Budgeted CM per composite unit
for budgeted mix

320,000 33.33% $ 8,480

$ 904,533,333

$ 22,613,333 (U) $ 56,533,333

Market-share variance Market-size variance

$ 33,920,000 (F)
Sales-quantity variance
 Static Budget:
Budgeted units of all product types sold x
Budgeted sales mix x
Budgeted CM per unit

100,000 48.00% $ 9,000

$ 432,000,000

(F)
antity variance

Static Budget:
Budgeted units of all product types sold x
Budgeted sales mix x
Budgeted CM per unit

100,000 52.00% $ 8,000

$ 416,000,000

(F)
antity variance

Budgeted market size x

 Budgeted market share x
Budgeted CM per composite unit
for budgeted mix

300,000 33.33% $ 8,480

$ 848,000,000

(F)
size variance