The annual flexible budget

below was prepared for use in making decisions relating to Product X:

100,000 150,000 200,000

Units Units Units

Sales volume P800,000 P1,200,000 P1,600,000

Manufacturing costs:

Variable P300,000 P 450,000 P 600,000

Fixed 200,000 200,000 200,000

P500,000 P 650,000 P 800,000

Selling and administrative expenses:

Variable P200,000 P 300,000 P 400,000

Fixed 160,000 160,000 160,000

P360,000 P 460,000 P 560,000

Income or (Loss) P(60,000) P 90,000 P 240,000

The 200,000 unit budget has been adopted and will be used for allocating fixed manufacturing

costs to units of Product X. at the end of the first 6 months, the following information is

available:

Units

Production completed 120,000

Sales 60,000

All fixed costs are budgeted and incurred uniformly throughout the year; and all costs incurred

coincide with the budget. Over- and under-applied fixed manufacturing costs are deferred until

the year-end. Annual sales have the following seasonal pattern.

Portion of Annual Sales

First quarter 10%

Second quarter 20%

Third quarter 30%

Fourth quarter 40%

17. The amount of fixed factory costs applied to product during the first 6 months under

absorption costing is

a. Overapplied by P20,000.

b. Equal to the fixed costs incurred.

c. Underapplied by P40,000.

d. Underapplied by P80,000.

18. Reported net income or (loss) for the first 6 months under absorption costing is

a. P160,000

b. P - 0 -

c. P 40,000

d. P (40,000)

19. Reported net income or (loss) for the first 6 months under variable costing is

a. P 180,000

b. P 40,000

c. P - 0 -

d. P(180,000)

20. Assuming that 90,000 units of Product X were sold during the first 6 months and that is to be

used as a basis, the revised budget estimate for the total number of units to be sold during this

year is

a. 360,000

b. 240,000

c. 200,000

d. 300,000

Questions 17 through 20 are based on the following information. The annual flexible budget below was prepared for use in making decisions relating to Product X: 100,000 Units Sales volume P800.000 150,000 Units P1,200,000 200,000 Units P1,600,000 Manufacturing costs: Variable P300,000 Fixed 200,000 P 450,000 200,000 P 600,000 200.000 P500,000 P 650.000 P 800,000 Selling and administrative expenses: Variable Fixed P200,000 Income or (Loss) 160,000 P360,000 P(60,000) P 300,000 160,000 P 400,000 160,000 P 460,000 P 560,000 P 90,000 P 240,000 Page | 3 The 200,000 unit budget has been adopted and will be used for allocating fixed manufacturing costs to units of Product X. at the end of the first 6 months, the following information is available: Production completed Sales Units 120,000 60,000 All fixed costs are budgeted and incurred uniformly throughout the year; and all costs incurred coincide with the budget. Over- and under-applied fixed manufacturing costs are deferred until the year-end. Annual sales have the following seasonal pattern. First quarter Second quarter Third quarter Fourth quarter Portion of Annual Sales 10% 20% 30% 40%