Scythe Company had the following information for the current year:

Beginning inventory 3,500 units

Ending inventory 3,000 units

Units produced 40,000 units

Unit selling price P50

Direct material cost P20/unit

Direct labor cost P10/unit

Variable overhead cost P5/unit

Budgeted fixed overhead cost P100,000/year

Selling and administrative expenses P80,000

Scythe is currently used traditional normal costing, and happened that actual costs were equal to its budgeted costs.

Required: Calculate the net income under the following costing methods:

1.) Full absorption costing

2.) Throughput costing

Problem 2

Spring, Inc. manufactures two products. It currently has 1,000 hours of direct labor and 2,000 hours of machine time available per month. The table below lists the contribution margin, labor and machine time requirements, and demand for each product.

Product A Product B

Unit contribution margin $15.00 $12.00

Demand 1,000 units 2,000 units

Labor time 3/4 hour 1/2 hour

Machine time 1 hour 1/2 hour

Required:

1.) Identify the constrained resource. Explain why.

2.) Based on your answer to the previous question, identify which products should be prioritized. Explain why.

3.) Based on your answers to the previous questions, determine the contribution margin if the company prioritizes production according to its limited resources.

Answer rating: 100% (QA)

Problem 1 1 Full absorption costing Under full absorption costing all manufacturing costs including both variable and fixed overhead costs are allocat... View the full answer