BM2206

PROBLEM-SOLVING (4 items x 5 points)

Perform what is being asked. Write your answers in the spaces provided.

Osawa, Inc. planned and manufactured 200,000 units of its single product during its first year of operations.
The variable manufacturing cost was P20 per unit produced. The variable operating (nonmanufacturing) cost
was P10 per unit sold. Planned and actual fixed manufacturing costs were P600,000. Planned and actual fixed
operating (nonmanufacturing) costs totaled P400,000. Osawa sold 120,000 units of a product at P40 per unit.

Required: Compute Osawa’s operating income using absorption costing and variable costing.

ABSORPTION COSTING

Revenues P4,800,000
Cost of Goods Sold:
Variable Manufacturing Costs P2,400,000
Allocated Fixed Manufacturing Costs 360,000 (2,760,000)
Gross Margin P2,040,000
Operating Costs:
Variable Operating 1,200,000
Fixed Operating 400,000 (1,600,000)
Operating Income P440,000

VARIABLE COSTING

Revenues P4,800,000
Cost of Goods Sold:
Variable Manufacturing Costs of Goods Sold P2,400,000
Variable Operating Costs 1,200,000 (3,600,000)
Contribution Margin P1,200,000
Fixed Costs:
Fixed Manufacturing Costs 600,000
Fixed Operating Costs 400,000 (1,000,000)
Operating Income P200,000

05 Activity 3 *Property of STI

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