.Jean Saburit has gone over the financial statements for Saburit Parts, Inc. The income statement has been prepared on an absorption costing basis and Saburit would like to have the statement revised on a variable costing basis.

The company has a normal production capacity of 1,200,000 units each year. Only one line of product is manufactured, and the inventory is accounted for on a FIFO basis. In 20x3, the fixed factory overhead was P6,000,000. During the year, Saburit Parts, inc manufactured 1,100,000 units of product.

Saburit Parts Inc.

Income Statement - Manufacturing For the year ended December 31, 20x3

Sales - P20,700,000

Cost of goods sold:

Inventory, first of year - P1,980,000

Current Production - 13,200,000

Cost of production available for sale- P15,180,000

Less: inventory end of year

1,380,000 - 13,600,000

Gross margin- P 6,900,000

Factory overhead capacity variance - 500,000

Income form manufacturing- P6,400,000

For the current year 20X4, plans have been made to manufacture 1,400,000 units of product and to sell 1,450,000 units. The unit variable cost and the selling price are expected to be the same as they were last year. The normal capacity level will remain unchanged but fixed factory overhead can be reduced to P5,400,000 for the year.

Required:

1.Recast the income statement for 20X3 to place it on a variable costing basis. (In your solution, show beginning inventory at a variable cost.)

2. Prepare the estimated income statement for 20X4 on an absorption costing basis.

3.Prepare the another estimated income statement for 20x4 on variable costing basis.

2.The Bee Company is comparing its present absorption costing practices with direct costing methods. An examination of its records produced the following information:

Minimum plant capacity - 40,000 units

Normal capacity - 36,000 units

Fixed factory overhead - P54,000

Fixed marketing and administrative expenses- P20,000

Sales price per unit - P10

Standard variable manufacturing cost per unit - P4

Variable marketing expense per unit sold - P1

For the year, the following data are available:

Budgeted production36,000 units

Actual production30,000 units

Sales28,000 units

Finished goods inventory =, January 1P1,,000

Unfavorable variance from standard

Variable manufacturing costsP5,000

All variances are written off directly at year-end as an adjustment to Cost of Goods Sold. Required:

1.Prepare the income statement under the direct costing method.

2.Prepare the income statement under the absorption costing method.

3..Tomas Company manufactures and sells single product. The following costs were incurred during the company's first year of operations.

Variable cost per unit:

Production:

Direct materials- P18

Direct labor- 7

Variable manufacturing overhead - 2

Variable selling and administrative expenses- 5

Fixed cost per year:

Fixed manufacturing overheadP160,000

Fixed selling and administrative expenses 110,000

During the year, the company produced 20,000 units ad sold 16,000 units.

The selling price f the company's product is P50 per unit.

Required:

1.Assume that the company is using absorption costing method.

a.Compute the unit product cost.

b.Prepare the income statement for the year.

2.Assume that the company is using variable costing method.

a.Compute the unit product cost.

b.Prepare the income statement for the year.