Preparation of Income Statement Using

Absorption and Variable

During the most recent year, Bheeta Company had the following data:
Units in beginning inventory                                                      -
Units produced                                                                      10,000
Units sold (P60 per unit)                                                         8,800
Variable costs per unit:
            Direct materials                                                        P 12
            Direct labor                                                                    7
            Variable overhead                                                          5
Fixed costs:
           Fixed overhead per unit produced                           P 8
           Fixed selling and administrative expenses       P 138,000

1. Prepare an income statement using absorption costing.

Bheeta Company

Income Statement

For the most recent Year

Sales (8,800 x 60) P 528,000

Cost of goods sold (281,600)

Gross profit 246,400

Selling and administrative expenses (138,000)

Operating Income 108,400

*COGS = 8,800 x 32

= P 281,600
 2. Prepare an income statement using variable costing.

Bheeta Company

Income Statement

For the most recent year

Sales (8,800 x 60) P 528,000

Variable cost of goods sold (211,200)

Gross profit 316,800

Fixed cost

Fixed overhead (10,000 x 8) 80,000

Fixed selling and administrative expense 138,000 (218,000)

Operating Income P 98,000

*COGS = 8,800 x 24

= P 211,200