Carlos has gone over the financial statement s of Primero, Inc. The income statement has been prepared on an absorption costing basis and Carlos would like to have the statement revised on a variable costing basis. The company has a normal 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 2009, the fixed factory overhead was P6,000,000. During the year, Primero, Inc. manufactured 1,100,000 units of product. Primero, Inc Income Statement For the Year Ended December 31, 2009 Sales P20,700,000 Cost of goods sold: Inventory, beginning P1,980,000 Current production 13,200,000 Goods available for sale 15,180,000 Inventory, ending 1,380,000 13,800,000 Gross margin P 6,900,000 Factory overhead capacity variance 500,000 Income from manufacturing P 6,400,000 ========= For the current year, 2010, plans have been made to manufacture 1,400,000 units of product and 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: a. Recast the income statement for 2009 to place it on a variable costing basis. b. Prepare an income statement for 2010 under the absorption costing basis. c. Prepare another income statement for 2010 under the variable costing bas
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Carlos has gone over the financial statement s of Primero, Inc. The income statement has been prepared on an absorption costing basis and Carlos would like to have the statement revised on a variable costing basis.
The company has a normal 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 2009, the fixed factory
Primero, Inc
Income Statement
For the Year Ended December 31, 2009
Sales P20,700,000
Cost of goods sold:
Inventory, beginning P1,980,000
Current production 13,200,000
Goods available for sale 15,180,000
Inventory, ending 1,380,000 13,800,000
Gross margin P 6,900,000
Factory overhead capacity variance 500,000
Income from manufacturing P 6,400,000
=========
For the current year, 2010, plans have been made to manufacture 1,400,000 units of product and 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:
a. Recast the income statement for 2009 to place it on a variable costing basis.
b. Prepare an income statement for 2010 under the absorption costing basis.
c. Prepare another income statement for 2010 under the variable costing bas
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