San Beda University

College of Arts and Sciences

Department of Accountancy
Managerial Accounting – Part 1

PRODUCT COSTING

Problem 1: Manila Corporation had the following information about its only product:
Selling Price P 40
Direct Materials 12
Direct Labor 10
Variable Overhead 5
Fixed Overhead 5*
Variable Selling and Administrative 2
Fixed Selling and Administrative 3*
*based on normal capacity of 10,000 units
Required:
1. Compute the unit cost under (a) Throughput Costing, (b) Variable Costing, and (c)
Absorption Costing
2. Compute the value of ending inventory and cost of sales under the different costing
methods considering the following production and sales schedules for the first four years
of operation:
20X1 20X2 20X3 20X4
Units Produced 10,000 10,000 10,000 11,000
Units Sold 9,000 10,500 10,000 10,000

3. Compute the net income for the first three years of operations under the different costing
methods.
4. Reconcile the difference in net income under variable and absorption costing methods.

Problem 2: Bulacan Company had the following information for May:

Direct materials P 13,000
Direct labor 15,000
Variable overhead 5,000
Fixed overhead 6,000
Fixed selling expenses 15,000
Variable selling expenses 1,800
Administrative expenses (All fixed) 12,000
units produced 10,000
units sold 9,000
Sales price P8 per unit
Required:
1. Compute the unit cost under (a) Throughput Costing, (b) Variable Costing, and (c)
Absorption Costing
2. Compute the value of ending inventory and cost of sales under the different costing
methods.
3. Compute the net income under the different costing methods.
4. Reconcile the difference in net income under variable and absorption costing methods.

Problem 3: Laguna Corporation sells only a single product and had the following information:
Selling Price P 30
Variable Manufacturing Costs 10
Variable Selling and Administrative 3
Fixed Manufacturing Costs 6*
Fixed Selling and Administrative 4*
*Based on Normal Capacity of 25,000 units
Required:
 1. Compute the unit cost under (a) Throughput Costing, (b) Variable Costing, and (c)
Absorption Costing
2. Considering that Laguna were able to produce 25,000 units but able to sell 20,000 units:
a. Compute the value of ending inventory and cost of sales under the different
costing methods.
b. Compute the net income under the different costing methods.
c. Reconcile the difference in net income under variable and absorption costing
methods.
3. Considering that Laguna were able to produce 20,000 units but able to sell 18,000 units:
a. Compute the value of ending inventory and cost of sales under the different
costing methods.
b. Compute the net income under the different costing methods.
c. Reconcile the difference in net income under variable and absorption costing
methods.

Problem 4: Batangas Corporation had the following results of operations for the past three years:
20X1 20X2 20X3
Units Produced 5,000 5,000 5,000
Units Sold 4,000 5,500 5,000
Net Income P 20,000 P 30,000 P 25,000
It was determined that Batangas’ fixed manufacturing cost amounted to P30,000, annually.
Required:
1. If Batangas uses Absorption costing, compute the net income the company should have
earned if it uses Variable Costing.
2. If Batangas uses Variable Costing, compute the net income the company should have
earned if it uses Absorption Costing.

Problem 5: Quezon Corporation has the following information for the year wherein it was able to
produce 10,000 units and sold 8,000 units
Manufacturing Non-Manufacturing
Variable P 50,000 P 20,000
Fixed 20,000 10,000
Required:
1. Compute the Unit cost under Variable and Absorption Costing
2. Determine the value of ending inventory under variable and absorption costing
3. Considering that Quezon sells its product at P12 per unit, compute the net income under
variable and absorption costing
4. Reconcile the net income under the two product costing methods.