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  • Learning Activity 1 Variable Vs Absorption Costing3

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    Jessica Capistrano produced 12,500 units and sold 10,000 units in her small manufacturing business. Under variable costing, her ending inventory is 2,500 units. Under absorption costing, her fixed production costs of $35,000 are allocated to the 12,500 units produced, increasing the per unit cost and resulting in no ending inventory. Her total variable annual costs charged under variable costing are $120,000 and her total fixed costs charged under absorption costing are $40,000.

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    Learning Activity 1 Variable vs Absorption Costing3 (1)

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    Jessica Capistrano produced 12,500 units and sold 10,000 units in her small manufacturing business. Under variable costing, her ending inventory is 2,500 units. Under absorption costing, her fixed production costs of $35,000 are allocated to the 12,500 units produced, increasing the per unit cost and resulting in no ending inventory. Her total variable annual costs charged under variable costing are $120,000 and her total fixed costs charged under absorption costing are $40,000.

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    4 views1 page

    Learning Activity 1 Variable Vs Absorption Costing3

    Uploaded by

    summerginger27
    Jessica Capistrano produced 12,500 units and sold 10,000 units in her small manufacturing business. Under variable costing, her ending inventory is 2,500 units. Under absorption costing, her fixed production costs of $35,000 are allocated to the 12,500 units produced, increasing the per unit cost and resulting in no ending inventory. Her total variable annual costs charged under variable costing are $120,000 and her total fixed costs charged under absorption costing are $40,000.

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    of 1

    MANAGEMENT ACCOUNTING & CONTROL

    VARIABLE COSTING

    Learning Activity 1. Absorption Costing vs. Variable Costing

    Jessica Capistrano has the following sales and production costs for her
    small manufacturing business:

    Sales per Unit 15.00


    Variable Production Cost 8.00
    Annual fixed production cost 35,000
    Variable office expense (unit) 3.00
    Annual fixed selling expense 5,000
    Produced 12,500 units during the
    period
    No inventory at January (beg)
    Sold 10,000 units

    Required: Compute for the following:


    1. Ending inventory under variable costing
    2. Ending inventory under absorption costing
    3. Total variable annual cost charged to expense in direct costing
    4. Total fixed cost charged against current year’s operations in absorption
    costing

    Fixed Cost = Total Cost – (Variable Cost Per Unit * Units Produced)

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