TUNKU PUTERI INTAN SAFINAZ SCHOOL OF ACCOUNTANCY

BKAM2013 MANAGEMENT ACCOUNTING I

FIRST SEMESTER 2022/2023 (A221)

LECTURE GROUP: B

GROUP NUMBER: 2

TUTORIAL 5

PREPARED FOR:
PROF. MADYA DR. HAZELINE BT. AYOUP

PREPARED BY:
1. MOHD AFIQ BIN CHE ISMAIL (255124)
2. SOH YING XIN (277289)
3. MOHAMAD HASRUL NIZAM BIN HASSAN (279369)
4. TAN BOON KEAT (279560)
5. KESHINI A/P THANABALU (280006)

DATE OF SUBMISSION:
09 JANUARY 2023
 INPUT

Data: a)

Item (Unit / RM)

Selling price (RM) 185
Unit of beginning inventory 600
Unit produced 13800
Unit sold 14200
Unit of ending inventory 200
Selling and administrative (RM) 75000
Manufacturing overhead (RM) 195000 b)

Variable Cost per Unit (RM)

Direct materials 54.00
Direct labor 64.50
Manufacturing overhead 4.50
Selling and administrative 16.50

c)

INPUT d)

Data: (i)

Item (Unit / RM)

Selling price (RM) 185
Unit of beginning inventory 600
Unit produced 13800
Unit sold 13000
Unit of ending inventory 1400
Selling and administrative (RM) 75000
Manufacturing overhead (RM) 195000

Variable Cost per Unit (RM)

Direct materials 54.00
Direct labor 64.50
Manufacturing overhead 4.50
Selling and administrative 16.50

Particular (RM)
Direct materials 54.00
Direct labor 64.50
Variable manufacturing overhead 4.50
Fixed manufacturing overhead 14.13
Variable costing unit product cos 137.13 (ii)

INPUT

Data:

Item (Unit / RM)

Selling price (RM) 185
Unit of beginning inventory 600
Unit produced 13800
Unit sold 13800
Unit of ending inventory 600
Selling and administrative (RM) 75000
Manufacturing overhead (RM) 195000

Variable Cost per Unit (RM)

Direct materials 54.00
Direct labor 64.50
Manufacturing overhead 4.50
Selling and administrative 16.50
e)
Particular (RM)
Direct materials 54.00
Direct labor 64.50
Variable manufacturing overhead 4.50
Fixed manufacturing overhead 14.13
Variable costing unit product cos 137.13

f)
 OUTPUT

Compute the unit product cost for the month under variable costing.

Particular (RM)
Direct materials 54.00
Direct labor 64.50
Variable manufacturing overhead 4.50
Variable costing unit product cost 123

Prepare a contribution format income statement for the month using variable costing.

Particular
Sales (14,200 x 185)
Less:Variable expenses
Variable cost of goods sold (14, 200 x 123)
Variable selling and administrative expenses (14, 200 x 16.50)
Contribution margin
Less: Fixed expenses
Fixed manufacturing overhead
Fixed selling and administrative expenses
Net operating income (loss)

Without preparing an income statement, determine the absorption costing net operating income for the mo
(Hint: Use the reconciliation Method)

Particular
Variable costing net operating income
Less: Fixed manufacturing overhead costs released from inventory [(14200 - 13800) x (195, 000 / 13, 800)]
Absorption costing net operating income (loss)

What if analysis:

Compute the net operating incomes for Variable Costing and Absorption costing, assuming the sales was 13
prepare income statement, may modify the format or data used in (b) and (c) above).

Variable Costing
Particular
Sales (13,000 x 185)
Less:Variable expenses
Variable cost of goods sold (600+13,800-1,400) x 123
Variable selling and administrative expenses (13, 000 x 16.50)
Contribution margin
Less: Fixed expenses
Fixed manufacturing overhead
Fixed selling and administrative expenses
Net operating income (loss)

Particular
Variable costing net operating income
Add: Fixed Manufacturing overhead costs deferred in inventory 1400-600 x (195, 000 / 13, 800)
Absorption costing net operating income (loss)

Compute the net operating incomes for Variable Costing and Absorption costing, assuming the sales was 13
prepare income statement, may modify the format or data used in (b) and (c) above).

Variable Costing
Particular
Sales (13,800 x 185)
Less:Variable expenses
Variable cost of goods sold (600+13,800-600) x 123
Variable selling and administrative expenses (13, 800 x 16.50)
Contribution margin
Less: Fixed expenses
Fixed manufacturing overhead
Fixed selling and administrative expenses
Net operating income (loss)

Particular
Variable costing net operating income
Add: Fixed Manufacturing overhead costs deferred in inventory 600-600 x (195, 000 / 13, 800)
Absorption costing net operating income (loss)

Construct a table showing the comparisons of the net operating incomes between the two costing methods,
figures. [Hint: Compare the net operating incomes derived from Requirement (b), (c), (d)(i) and (d)(ii).

Unit Sale Unit Produced

14200 13800
13000 13800
13800 13800

What conclusion can you make based on the comparative table in (e)?
When the number of units sold is equal to the number of units produced, the absorption income and the variable in
because the variable costs, which include the direct materials, direct labor, and variable overhead costs, will be ful

If the number of units sold is greater than the number of units produced, the variable income will be higher than th
because not all of the variable costs will be absorbed by the units sold, and some of the fixed costs, such as the fix
absorbed as well.

On the other hand, if the number of units sold is less than the number of units produced, the absorption income wi
income. This is because not all of the variable costs will be absorbed by the units sold, and some of the fixed costs
Instead, these costs will be allocated to the units produced but not sold, resulting in an absorption income that is h
 OUTPUT

costing.

nth using variable costing.

(RM) (RM)
2627000

1746600
234300 -1980900
646100

195000
75000 -270000
376100

rption costing net operating income for the month.

(RM)
376100
ry [(14200 - 13800) x (195, 000 / 13, 800)] -5652.17
370447.83

d Absorption costing, assuming the sales was 13,000 units. (Not need to
in (b) and (c) above).

(RM) (RM)
2405000

1599000
214500 -1813500
 591500

195000
75000 -270000
321500

(RM)
321500
1400-600 x (195, 000 / 13, 800) 11304.35
332804.35

d Absorption costing, assuming the sales was 13,800 units. (Not need to
in (b) and (c) above).

(RM) (RM)
2553000

1697400
227700 -1925100
627900

195000
75000 -270000
357900

(RM)
357900
600-600 x (195, 000 / 13, 800) 0
357900

ing incomes between the two costing methods, for the three different sales
m Requirement (b), (c), (d)(i) and (d)(ii).

Net Operating Income

Absorption Costing Variable Coasting
370447.83 376100
332804.35 321500
357900 357900
 oduced, the absorption income and the variable income will be the same. This is
rect labor, and variable overhead costs, will be fully absorbed by the units sold.

oduced, the variable income will be higher than the absorption income. This is
s sold, and some of the fixed costs, such as the fixed overhead costs, will be

mber of units produced, the absorption income will be higher than the variable
rbed by the units sold, and some of the fixed costs will not be absorbed either.
ot sold, resulting in an absorption income that is higher than the variable income.
 INPUT

Data:

Variable
Year Units Produced Units Sold
Overhead (RM)
2017 15000 15000 75000
2018 15000 12500 75000
2019 12000 16500 60000
2020 15000 13000 75000
 a) Determine the operating income under variable costing

Fixed Overhead Operating Item 2017

(RM) Income (RM) Beginning inventory 3500
45000 60000 Add: Production 15000
45000 54000 Less: Sales -15000
36000 66000 Ending inventory 3500
45000 58000

Particular 2017
Fixed overhed 45000
Production in units 15000
Fixed overhed per unit 3
Beginning inventory 3500
Fixed overhed in 10500
beginning inventory
Ending inventory 3500
Fixed overhed in 10500
ending inventory

Particular
Operating income under absorption costing
Less: Fixed overhed deferred in ending inventory
Add: Fixed overhed released in beginning inventory
Operating income under variable costing

Based on the table in (a), explain how the changing inve

b) operating income and total operating income.

Income under
Year
Absorption Costing
2017 60000
2018 54000
2019 66000
2020 58000
Total 238000

If inventory levels increase, it means that more units were

and included in the cost of the units that are still in invento
absorption costing.

On the other hand, if inventory levels decrease, it means th

will be allocated to a larger number of units, and the cost o

If the inventory levels and the overhead rate remain consta

under variable costing.
 If inventory levels increase, it means that more units were
and included in the cost of the units that are still in invento
absorption costing.

On the other hand, if inventory levels decrease, it means th

will be allocated to a larger number of units, and the cost o

If the inventory levels and the overhead rate remain consta

under variable costing.

c) What if analysis:

i. Let assume the fixed overhead for 2020 was RM50,000.

Particular
Operating income under absorption costing
Increase in fixed overhead [50,000 - 45,000]
Production in 2020
Increase in fixed overhead cost per unit
Increase in fixed overhead expensed in 2020 [13,000 x 0.3
Revised operating income under absorption costing

If the fixed overhead rate increases while the inventory lev

allocated to each unit produced, and the higher overhead ra

On the other hand, the variable cost per unit will not be aff

In terms of the impact on the income statement, if the fixed

decrease, while the variable income will remain unchanged
decrease the profit margin on each unit sold. Therefore, the
costing.

ii. Let assume the fixed overhead for 2019 was RM50,000.

Particular
Operating income under absorption costing
Increase in fixed overhead [50,000 - 36,000]
Production in 2019
Increase in fixed overhead cost per unit
Increase in fixed overhead expensed in 2019 [16,500 x 1.1
Revised operating income under absorption costing

If the fixed overhead rate increases while the inventory lev

allocated to each unit produced, and the higher overhead ra

On the other hand, the variable cost per unit will not be aff

In terms of the impact on the income statement, if the fixed

decrease, while the variable income will remain unchanged
decrease the profit margin on each unit sold. Therefore, the
costing.
On the other hand, the variable cost per unit will not be aff

In terms of the impact on the income statement, if the fixed

decrease, while the variable income will remain unchanged
decrease the profit margin on each unit sold. Therefore, the
costing.
 OUTPUT

nder variable costing for each year. [Hint: Construct a reconciliation table with several columns for the years]

2018 2019 2020

3500 6000 1500
15000 12000 15000
-12500 -16500 -13000
6000 1500 3500

2018 2019 2020

45000 36000 45000
15000 12000 15000
3 3 3
3500 6000 1500
10500 18000 4500
6000 1500 3500
18000 4500 10500

ular 2017 2018 2019 2020

60000 54000 66000 58000
ng inventory -10500 -18000 -4500 -10500
nning inventory 10500 10500 18000 4500
60000 46500 79500 52000

ow the changing inventory levels affected annual

ng income.

Income under
Variable Costing
60000
46500
79500
52000
238000

that more units were produced than were sold during the period. This means that the fixed overhead costs will be deferred
hat are still in inventory. As a result, the cost of goods sold will be lower, and operating income will be higher, under

s decrease, it means that more units were sold than were produced during the period. This means that the fixed overhead costs
of units, and the cost of goods sold will be higher, resulting in lower operating income under absorption costing.

ead rate remain constant over time, then operating income under absorption costing will be the same as operating income
 that more units were produced than were sold during the period. This means that the fixed overhead costs will be deferred
hat are still in inventory. As a result, the cost of goods sold will be lower, and operating income will be higher, under

s decrease, it means that more units were sold than were produced during the period. This means that the fixed overhead costs
of units, and the cost of goods sold will be higher, resulting in lower operating income under absorption costing.

ead rate remain constant over time, then operating income under absorption costing will be the same as operating income

2020 was RM50,000. Explain how an increase in the overhead in 2020 would affect operating incomes

ular 2020
58000
5000
15000
0.33
in 2020 [13,000 x 0.33] 4333
bsorption costing 53667

while the inventory levels remain the same, the absorption cost per unit will increase. This is because the fixed overhead is
the higher overhead rate will result in a higher allocation per unit.

per unit will not be affected by the increase in the fixed overhead rate.

statement, if the fixed overhead rate increases while the inventory levels remain the same, the absorption income will
will remain unchanged. This is because the higher fixed overhead rate will result in a higher absorption cost, which will
nit sold. Therefore, the operating income under absorbption costing will be higher than the operating income under variable

2019 was RM50,000. Explain how an increase in the overhead in 2019 would affect operating incomes.

ular 2019
66000
14000
12000
1.17
in 2019 [16,500 x 1.17] 19250
bsorption costing 46750

while the inventory levels remain the same, the absorption cost per unit will increase. This is because the fixed overhead is
the higher overhead rate will result in a higher allocation per unit.

per unit will not be affected by the increase in the fixed overhead rate.

statement, if the fixed overhead rate increases while the inventory levels remain the same, the absorption income will
will remain unchanged. This is because the higher fixed overhead rate will result in a higher absorption cost, which will
nit sold. Therefore, the operating income under absorbption costing will be lower than the operating income under variable
per unit will not be affected by the increase in the fixed overhead rate.

statement, if the fixed overhead rate increases while the inventory levels remain the same, the absorption income will
will remain unchanged. This is because the higher fixed overhead rate will result in a higher absorption cost, which will
nit sold. Therefore, the operating income under absorbption costing will be lower than the operating income under variable
mns for the years]

ead costs will be deferred

will be higher, under

that the fixed overhead costs

rption costing.

me as operating income
ead costs will be deferred
will be higher, under

that the fixed overhead costs

rption costing.

me as operating income

ng incomes

use the fixed overhead is

sorption income will

rption cost, which will
ing income under variable

ng incomes.

use the fixed overhead is

sorption income will

rption cost, which will
ng income under variable
sorption income will
rption cost, which will
ng income under variable