PROBLEM 1 ABSORPTION METHOD

Max Company manufactures and sells a single product. The following costs were incurred

during the company's first year of operations:

Variable cost per unit:

Production:

Direct Materials 18

Direct Labor 7

Variable Mfg. Overhead 2

Variable selling & Admin 5

Fixed Costs per year:

Fixed Manufacturing overhead 160,000

Fixed Selling & Admin 110,000

During the year, the company produced 20,000 units and sold 16,000 units. The selling price of

the company's product is 50 per unit.

Required:

1. Compute the cost per unit of product using absorption costing method

2. Compute the net income under absorption costing method

3. Compute for the cost of ending inventory under absorption costing method

PROBLEM 2 VARIABLE COSTING METHOD

Max Company manufactures and sells a single product. The following costs were incurred

during the company's first year of operations:

Variable cost per unit:

Production:

Direct Materials 18

Direct Labor 7

Variable Mfg. Overhead 2

Variable selling & Admin 5

Fixed Costs per year:

Fixed Manufacturing overhead 160,000

Fixed Selling & Admin 110,000

During the year, the company produced 20,000 units and sold 16,000 units. The selling price of

the company's product is 50 per unit.

Required:

1. Compute the cost per unit of product using variable costing method

2. Compute the net income under variable costing method

3. Compute for the cost of ending inventory under variable costing method

PROBLEM 3 BREAK EVEN POINT SINGLE PRODUCT

The Income statement of Woodstock Company for the past year is as follows:

Sales (150,000 units @ 30) 4,500,000

Cost of goods sold:

Materials 1,050,000

Labor 1,500,000

Variable Factory Overhead 450,000

Fixed Factory Overhead 500,000 3,500,000

Gross Profit 1,000,000

Variable Marketing Expenses 135,000

Fixed Marketing Expenses 185,000

Fixed Manufacturing Expense 180,000 500,000

Net Income Before Tax 500,000

Income Tax 250,000

Net Income 250,000

Required:

1. Compute the Break even points in Units

2. Compute the Break even points in Peso Sales

3. Assuming the Woodstock would like to generate 300,000 net income after tax, how

many units must be sold?