Problem 1

Last year, Baker Company produced 30,000 units and sold 28,000 units. Beginning inventory was zero. During
the period, the following costs were incurred:

Indirect labor (variable) P 60,000

Indirect materials (variable) 30,000
Other variable overhead 90,000
Fixed manufacturing overhead 180,000
Fixed administrative expenses 150,000
Fixed selling expenses 120,000
Variable selling expenses, per unit 40
Direct labor, per unit 80
Direct materials, per unit 20

Required: Compute the amount of ending inventory using:

A. Absorption costing
B. Variable costing

Problem 2

During the most recent year, Boston Corp. had the following data:

Beginning inventory in units -

Units produced 15,400
Units sold (P125 per unit) 8,200
Variable costs per unit:
Direct materials P 13
Direct labor P 16
Variable overhead P8

Fixed costs:
Fixed overhead per unit produced P 23
Fixed selling and administrative P 185,000

Required:
A. How many units are in ending inventory?
B. Using absorption costing, calculate the per-unit product cost. What is the value of ending inventory?
C. Using variable costing, calculate the per-unit product cost. What is the value of ending inventory?
D. Prepare an income statement using absorption costing.
E. Prepare an income statement using variable costing.