MANAGEMENT ACCOUNTING - Solutions Manual CHAPTER 12 VARIABLE COSTING I Questions The variable costing technique does not consider fixed costs as unimportant or irrelevant, but it maintains that the distinction between behaviors of different costs is crucial for certain decisions The central issue in variable costing is what is the proper timing for release of fixed manufacturing overhead as expense: at the time of incurrence, or at the time the finished units to which the fixed overhead relates are sold Direct costing would be more accurately called variable or marginal costing because in substance it is the inventory costing method which applies only variable production costs to product; fixed factory overhead is not assigned to product Marketing and administrative costs are treated as period costs under both variable costing and absorption costing methods of product costing Under absorption costing, as a company manufactures units of product, the fixed manufacturing overhead costs of the period are added to the units, along with direct materials, direct labor, and variable manufacturing overhead If some of these units are not sold by the end of the period, then they are carried into the next period as inventory The fixed manufacturing overhead cost attached to the units in ending inventory follow the units into the next period as part of their inventory cost When the units carried over as inventory are finally sold, the fixed manufacturing overhead cost that has been carried over with the units is included as part of that period’s cost of goods sold Many accountants and managers believe absorption costing does a better job of matching costs with revenues than variable costing They argue that all manufacturing costs must be assigned to products to properly match the costs of producing units of product with the revenues from the units when they are sold They believe that the fixed costs of depreciation, taxes, insurance, supervisory salaries, and so on, are just as essential to manufacturing products as are the variable costs 12-1 Chapter 12 Variable Costing If fixed manufacturing overhead cost is released from inventory, then inventory levels must have decreased and therefore production must have been less than sales Under absorption costing it is possible to increase net operating income without increasing sales by increasing the level of production If production exceeds sales, units of product are added to inventory These units carry a portion of the current period’s fixed manufacturing overhead costs into the inventory account, thereby reducing the current period’s reported expenses and causing net operating income to rise Generally speaking, variable costing cannot be used externally for financial reporting purposes nor can it be used for tax purposes 10 If production exceeds sales, absorption costing will show higher net operating income than variable costing The reason is that inventories will increase and therefore part of the fixed manufacturing overhead cost of the current period will be deferred in inventory to the next period under absorption costing By contrast, all of the fixed manufacturing overhead cost of the current period will be charged immediately against revenues as a period cost under variable costing 11 Absorption and variable costing differ in how they handle fixed manufacturing overhead Under absorption costing, fixed manufacturing overhead is treated as a product cost and hence is an asset until products are sold Under variable costing, fixed manufacturing overhead is treated as a period cost and is expensed on the current period’s income statement 12 Advocates of variable costing argue that fixed manufacturing costs are not really the cost of any particular unit of product If a unit is made or not, the total fixed manufacturing costs will be exactly the same Therefore, how can one say that these costs are part of the costs of the products? These costs are incurred to have the capacity to make products during a particular period and should be charged against that period as period costs according to the matching principle II Exercises Exercise (Variable and Absorption Costing Unit Product Costs and Income Statements) 12-2 Variable Costing Chapter 12 Requirement a The unit product cost under absorption costing would be: Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Fixed manufacturing overhead (P160,000 ÷ 20,000 units) Unit product cost P18 27 P35 b The absorption costing income statement: Sales (16,000 units × P50 per unit) Less cost of goods sold: Beginning inventory Add cost of goods manufactured (20,000 units × P35 per unit) Goods available for sale Less ending inventory (4,000 units × P35 per unit) Gross margin Less selling and administrative expenses Net operating income P800,000 P 700,000 700,000 140,000 560,000 240,000 190,000* P 50,000 *(16,000 units × P5 per unit) + P110,000 = P190,000 Requirement a The unit product cost under variable costing would be: Direct materials Direct labor Variable manufacturing overhead Unit product cost P18 P27 b The variable costing income statement: Sales (16,000 units × P50 per unit) Less variable expenses: Variable cost of goods sold: Beginning inventory Add variable manufacturing costs (20,000 units × P27 per unit) 12-3 P800,000 P 540,000 Chapter 12 Variable Costing Goods available for sale Less ending inventory (4,000 units × P27 per unit) Variable cost of goods sold Variable selling expense (16,000 units × P5 per unit) Contribution margin Less fixed expenses: Fixed manufacturing overhead Fixed selling and administrative Net operating income 540,000 108,000 432,000 * 80,000 160,000 110,000 512,000 288,000 270,000 P 18,000 * The variable cost of goods sold could be computed more simply as: 16,000 units × P27 per unit = P432,000 Exercise (Variable and Absorption Costing Unit Product Costs) Requirement Sales (40,000 units × P33.75 per unit) P1,350,000 Less variable expenses: Variable cost of goods sold (40,000 units × P16 per unit*) P640,000 Variable selling and administrative expenses (40,000 units × P3 per unit) 120,000 760,000 Contribution margin 590,000 Less fixed expenses: Fixed manufacturing overhead 250,000 Fixed selling and administrative expenses 300,000 550,000 Net operating income P 40,000 *Direct materials P10 Direct labor Variable manufacturing overhead Total variable manufacturing cost P16 Requirement The difference in net operating income can be explained by the P50,000 in fixed manufacturing overhead deferred in inventory under the absorption costing method: 12-4 Variable Costing Chapter 12 Variable costing net operating income Add: Fixed manufacturing overhead cost deferred in inventory under absorption costing: 10,000 units × P5 per unit in fixed manufacturing overhead cost Absorption costing net operating income P40,000 50,000 P90,000 Exercise (Variable Costing Unit Product Cost and Income Statement; Break-even) Requirement Under variable costing, only the variable manufacturing costs are included in product costs Direct materials Direct labor Variable manufacturing overhead Unit product cost P 600 300 100 P1,000 Note that selling and administrative expenses are not treated as product costs; that is, they are not included in the costs that are inventoried These expenses are always treated as period costs and are charged against the current period’s revenue Requirement The variable costing income statement appears below: Sales P18,000,000 Less variable expenses: Variable cost of goods sold: Beginning inventory P Add variable manufacturing costs (10,000 units × P1,000 per unit) 10,000,000 Goods available for sale 10,000,000 Less ending inventory (1,000 units × P1,000 per unit) 1,000,000 12-5 Chapter 12 Variable Costing Variable cost of goods sold* Variable selling and administrative (9,000 units × P200 per unit) Contribution margin Less fixed expenses: Fixed manufacturing overhead Fixed selling and administrative Net operating loss 9,000,000 1,800,000 10,800,000 7,200,000 3,000,000 4,500,000 7,500,000 P (300,000) * The variable cost of goods sold could be computed more simply as: 9,000 units sold × P1,000 per unit = P9,000,000 Requirement The break-even point in units sold can be computed using the contribution margin per unit as follows: Selling price per unit P2,000 Variable cost per unit 1,200 P 800 Contribution margin per unit Break-even unit sales = = Fixed expenses Unit contribution margin P7,500,000 P800 per unit = 9,375 units Exercise (Absorption Costing Unit Product Cost and Income Statement) Requirement Under absorption costing, all manufacturing costs (variable and fixed) are included in product costs Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead (P3,000,000 ÷ 10,000 units) Unit product cost 12-6 P 600 300 100 300 P1,300 Variable Costing Chapter 12 Requirement The absorption costing income statement appears below: Sales (9,000 units × P2,000 per unit) Cost of goods sold: Beginning inventory P Add cost of goods manufactured (10,000 units × P1,300 per unit) 13,000,000 Goods available for sale 13,000,000 Less ending inventory (1,000 units × P1,300 per unit) 1,300,000 Gross margin Selling and administrative expenses: Variable selling and administrative (9,000 units × P200 per unit) 1,800,000 Fixed selling and administrative 4,500,000 Net operating income P18,000,000 11,700,000 6,300,000 P 6,300,000 Note: The company apparently has exactly zero net operating income even though its sales are below the break-even point computed in Exercise This occurs because P300,000 of fixed manufacturing overhead has been deferred in inventory and does not appear on the income statement prepared using absorption costing Exercise (Variable Costing Income Statement; Explanation of Difference in Net Operating Income) Requirement 2,000 units × P60 per unit fixed manufacturing overhead = P120,000 Requirement The variable costing income statement appears below: Sales P4,000,000 Variable expenses: Variable cost of goods sold: Beginning inventory P Add variable manufacturing costs (10,000 units × P310 per unit) 3,100,000 Goods available for sale .3,100,000 12-7 Chapter 12 Variable Costing Less ending inventory (2,000 units × P310 per unit) 620,000 Variable cost of goods sold* 2,480,000 Variable selling and administrative (8,000 units × P20 per unit) 160,000 2,640,000 Contribution margin 1,360,000 Fixed expenses: Fixed manufacturing overhead 600,000 Fixed selling and administrative 400,000 1,000,000 Net operating income P 360,000 * The variable cost of goods sold could be computed more simply as: 8,000 units sold × P310 per unit = P2,480,000 The difference in net operating income between variable and absorption costing can be explained by the deferral of fixed manufacturing overhead cost in inventory that has taken place under the absorption costing approach Note from part (1) that P120,000 of fixed manufacturing overhead cost has been deferred in inventory to the next period Thus, net operating income under the absorption costing approach is P120,000 higher than it is under variable costing Exercise (Evaluating Absorption and Variable Costing as Alternative Costing Methods) Requirement a By assumption, the unit selling price, unit variable costs, and total fixed costs are constant from year to year Consequently, variable costing net operating income will vary with sales If sales increase, variable costing net operating income will increase If sales decrease, variable costing net operating income will decrease If sales are constant, variable costing net operating income will be constant Because variable costing net operating income was P16,847 each year, unit sales must have been the same in each year The same is not true of absorption costing net operating income Sales and absorption costing net operating income not necessarily move in the same direction because changes in inventories also affect absorption costing net operating income b When variable costing net operating income exceeds absorption costing net operating income, sales exceeds production Inventories shrink and fixed manufacturing overhead costs are released from inventories In 12-8 Variable Costing Chapter 12 contrast, when variable costing net operating income is less than absorption costing net operating income, production exceeds sales Inventories grow and fixed manufacturing overhead costs are deferred in inventories The year-by-year effects are shown below Year Variable costing NOI = Absorption costing NOI Production = Sales Inventories remain the same Year Variable costing NOI < Absorption costing NOI Production > Sales Year Variable costing NOI > Absorption costing NOI Production < Sales Inventories grow Inventories shrink Requirement a As discussed in part (1 a) above, unit sales and variable costing net operating income move in the same direction when unit selling prices and the cost structure are constant Because variable costing net operating income declined, unit sales must have also declined This is true even though the absorption costing net operating income increased How can that be? By manipulating production (and inventories) it may be possible to maintain or increase the level of absorption costing net operating income even though unit sales decline However, eventually inventories will grow to be so large that they cannot be ignored b As stated in part (1 b) above, when variable costing net operating income is less than absorption costing net operating income, production exceeds sales Inventories grow and fixed manufacturing overhead costs are deferred in inventories The year-by-year effects are shown below Year Variable costing NOI = Absorption costing NOI Production = Sales Inventories remain the same Year Variable costing NOI < Absorption costing NOI Production > Sales Year Variable costing NOI < Absorption costing NOI Production > Sales Inventories grow Inventories grow Requirement Variable costing appears to provide a much better picture of economic reality than absorption costing in the examples above In the first case, 12-9 Chapter 12 Variable Costing absorption costing net operating income fluctuates wildly even though unit sales are the same each year and unit selling prices, unit variable costs, and total fixed costs remain the same In the second case, absorption costing net operating income increases from year to year even though unit sales decline Absorption costing is much more subject to manipulation than variable costing Simply by changing production levels (and thereby deferring or releasing costs from inventory) absorption costing net operating income can be manipulated upward or downward Note: This exercise is based on the following data: Common data: Annual fixed manufacturing costs Contribution margin per unit Annual fixed SGA costs P153,153 P35,000 P180,000 Part 1: Year Beginning inventory Production 10 Sales 10 Ending Year 11 10 Year 10 Variable costing net operating income P16,847 P16,847 P16,847 Fixed manufacturing overhead in beginning inventory* P15,315 Fixed manufacturing overhead in ending inventory P15,315 Absorption costing net operating income P16,847 P15,315 P27,846 P29,378 P27,846 P17,017 P6,018 * Fixed manufacturing overhead in beginning inventory is assumed in both parts and for Year A FIFO inventory flow assumption is used Part 2: Year Beginning inventory Production 10 Sales 10 Ending Year 12 4 20 16 Variable costing net operating income (loss) P16,847 (P18,153) (P53,153) Fixed manufacturing overhead in beginning inventory* P15,315 P15,315 P51,051 12-10 Year Variable Costing Chapter 12 Fixed manufacturing overhead in ending inventory P15,315 Absorption costing net operating income P16,847 P51,051 P17,583 P122,522 P18,318 * Fixed manufacturing overhead in beginning inventory is assumed in both parts and for Year A FIFO inventory flow assumption is used III Problems Problem Requirement 1: Variable Costing Method Romero Parts, Inc Income Statement - Manufacturing For the Year Ended December 31, 2005 Sales Less: Variable Cost of Sales Inventory, Jan Current Production Total Available for Sale Inventory, Dec 31 Contribution Margin Less Fixed Costs and Expenses Net Income P20,700,000 P1,155,000 7,700,000 P8,855,000 805,000 8,050,000 P12,650,000 6,000,000 P 6,650,000 Requirement 2: Absorption Costing Method Romero Parts, Inc Income Statement - Manufacturing For the Year Ending December 31, 2006 Sales Less Cost of goods sold: P26,100,000 12-11 Chapter 12 Variable Costing Inventory, Jan Current Production Total Available for Sale Inventory, Dec 31 Cost of Sales - Standard Favorable Capacity Variance Income from Manufacturing P 1,380,000 16,100,000 P17,480,000 747,500 P16,732,500 900,000 15,832,500 P10,267,500 Requirement 3: Variable Costing Method Romero Parts, Inc Income Statement - Manufacturing For the Year Ending December 31, 2006 Sales Less Variable Cost of Sales: Inventory, Jan Production Total Available for Sale Inventory, Dec 31 Contribution Margin - Manufacturing Less Fixed Cost Income from Manufacturing P26,100,000 P 805,000 9,800,000 P10,605,000 455,000 10,150,000 P15,950,000 5,400,000 P10,550,000 Reconciliation Net Income, absorption costing Add Fixed Factory Overhead Inventory, 1/1 Total Less Fixed Factory Overhead Inventory, 12/31 Net Income, direct costing Problem Requirement Honey Company Income Statement - Direct Costing For the Year Ended December 31, 2005 12-12 P10,267,500 575,000 P10,842,500 292,500 P10,550,000 Variable Costing Chapter 12 Sales Less Variable Cost of Sales: Finished Goods Inventory, 1/1 Current Production Total Available for Sale Finished Goods Inventory, 12/31 Variable Cost of Sale - Standard Unfavorable Variance Contribution Margin - Manufacturing Less Variable Marketing Expenses Contribution Margin - Final Less Fixed Costs and Expenses: Fixed Factory Overhead Fixed Marketing and Administrative Expenses Net Income P280,000 P 4,000 120,000 P124,000 12,000 P112,000 5,000 117,000 P163,000 28,000 P135,000 P 54,000 20,000 74,000 P 61,000 Requirement Honey Company Income Statement - Absorption Costing For the Year Ended December 31, 2005 Sales P280,000 Less: Cost of Sales Finished goods inventory, Jan (1,000 x P5.50) Current production costs Variable (30,000 x P4.00) P120,000 Fixed (30,000 x P1.50) 45,000 Less: Finished goods inventory, Dec 31 (3,000 x P5.50) Cost of Sales - at Standard Add (Deduct) Variance Unfavorable variable manufacturing costs variances Underapplied fixed factory overhead (6,000 x P1.50) Cost of Sales - Actual Gross Profit Less: Selling and administrative expenses 12-13 P 5,500 165,000 P170,500 16,500 P154,000 5,000 9,000 P168,000 P112,000 Chapter 12 Variable Costing Variable Fixed 28,000 20,000 P 48,000 P 64,000 Net Income Problem (Variable Costing Income Statement; Reconciliation) Requirement The unit product cost under the variable costing approach would be computed as follows: P 8 Direct materials Direct labor 10 Variable manufacturing overhead Unit product cost P20 With this figure, the variable costing income statements can be prepared: Year Year Sales P1,000,000 P1,500,000 Less variable expenses: Variable cost of goods sold @ P20 per unit 400,000 600,000 Variable selling and administrative @ P3 per unit 60,000 90,000 Total variable expenses 460,000 690,000 Contribution margin 540,000 810,000 Less fixed expenses: Fixed manufacturing overhead 350,000 350,000 Fixed selling and administrative 250,000 250,000 Total fixed expenses 600,000 600,000 Net operating income (loss) P (60,000) P 210,000 Requirement Variable costing net operating income (loss) P (60,000) P 210,000 Add: Fixed manufacturing overhead cost deferred in inventory under absorption costing (5,000 units × P14 per unit) 70,000 Deduct: Fixed manufacturing overhead cost (70,000) released from inventory under absorption 12-14 Variable Costing Chapter 12 costing (5,000 units × P14 per unit) Absorption costing net operating income P 10,000 P 140,000 Problem (Prepare and Interpret Statements; Changes in Both Sales and Production; JIT) Requirement Year P1,000,000 Sales Less variable expenses: Variable cost of goods sold @ P4 per unit Variable selling and administrative @ P2 per unit Total variable expenses Contribution margin Less fixed expenses: Fixed manufacturing overhead Fixed selling and administrative Total fixed expenses Net operating income (loss) Year Year P 800,000 P1,000,000 200,000 160,000 200,000 100,000 300,000 700,000 80,000 240,000 560,000 100,000 300,000 700,000 600,000 70,000 670,000 P 30,000 600,000 600,000 70,000 70,000 670,000 670,000 P(110,000) P 30,000 Requirement a Year P 4 Variable manufacturing cost Fixed manufacturing cost: P600,000 ÷ 50,000 units P600,000 ÷ 60,000 units P600,000 ÷ 40,000 units Unit product cost Year P 4 Year P 4 12 10 P16 P14 15 P19 b Variable costing net operating income (loss) Add (Deduct): Fixed manufacturing overhead cost deferred in inventory from Year to Year under absorption costing (20,000 units × P10 per unit) Add: Fixed manufacturing overhead 12-15 P30,000 P(110,000) 200,000 P 30,000 (200,000) 150,000 Chapter 12 Variable Costing cost deferred in inventory from Year to the future under absorption costing (10,000 units × P15 per unit) Absorption costing net operating income (loss) P30,000 P 90,000 P(20,000) Requirement Production went up sharply in Year thereby reducing the unit product cost, as shown in (2a) This reduction in cost, combined with the large amount of fixed manufacturing overhead cost deferred in inventory for the year, more than offset the loss of revenue The net result is that the company’s net operating income rose even though sales were down Requirement The fixed manufacturing overhead cost deferred in inventory from Year was charged against Year operations, as shown in the reconciliation in (2b) This added charge against Year operations was offset somewhat by the fact that part of Year 3’s fixed manufacturing overhead costs was deferred in inventory to future years [again see (2b)] Overall, the added costs charged against Year were greater than the costs deferred to future years, so the company reported less income for the year even though the same number of units was sold as in Year Requirement a Several things would have been different if the company had been using JIT inventory methods First, in each year production would have been geared to sales so that little or no inventory of finished goods would have been built up in either Year or Year Second, unit product costs probably would have been the same in all three years, since these costs would have been established on the basis of expected sales (50,000 units) for each year Third, since only 40,000 units were sold in Year 2, the company would have produced only that number of units and therefore would have had some underapplied overhead cost for the year (See the discussion on underapplied overhead in the following paragraph.) b If JIT had been in use, the net operating income under absorption costing would have been the same as under variable costing in all three years The reason is that with production geared to sales, there would 12-16 Variable Costing Chapter 12 have been no ending inventory on hand, and therefore there would have been no fixed manufacturing overhead costs deferred in inventory to other years Assuming that the company expected to sell 50,000 units in each year and that unit product costs were set on the basis of that level of expected activity, the income statements under absorption costing would have appeared as follows: Sales Less cost of goods sold: Cost of goods manufactured @ P16 per unit Add underapplied overhead Cost of goods sold Gross margin Selling and administrative expenses Net operating income (loss) Year P1,000,000 800,000 800,000 200,000 170,000 P 30,000 Year Year P 800,000 P1,000,000 640,000 * 120,000 ** 760,000 40,000 150,000 P(110,000) P 800,000 800,000 200,000 170,000 30,000 * 40,000 units × P16 per unit = P640,000 ** 10,000 units not produced × P12 per unit fixed manufacturing overhead cost = P120,000 fixed manufacturing overhead cost not applied to products Problem (Contrasting Variable and Absorption Costing) Requirement (a) Under absorption costing, all manufacturing costs, variable and fixed, are included in unit product costs: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead (P120,000  10,000 units) (P120,000  6,000 units) Unit product cost Requirement (b) 12-17 Year P11 Year P11 12 P32 20 P40 Chapter 12 Variable Costing The absorption costing income statements follow: Sales (8,000 units x P50 per unit) Cost of goods sold: Beginning inventory Add cost of goods manufactured (10,000 units x P32 per unit; 6,000 units x P40 per unit) Goods available for sale Less ending inventory (2,000 units x P32 per unit; units x P40 per unit) Gross margin Selling and administrative expenses (8,000 units x P4 per unit + P70,000) Net operating income Year P400,000 P Year P400,000 P 64,000 320,000 320,000 240,000 304,000 64,000 256,000 144,000 102,000 P 42,000 304,000 96,000 102,000 P (6,000) Requirement (a) Under variable costing, only the variable manufacturing costs are included in unit product costs: Year P11 P20 Direct materials Direct labor Variable manufacturing overhead Unit product cost Year P11 P20 Requirement (b) The variable costing income statements follow Notice that the variable cost of goods sold is computed in a simpler, more direct manner than in the examples provided earlier On a variable costing income statement, this simple approach or the more complex approach illustrated earlier is acceptable for computing the cost of goods sold Year P400,000 Sales (8,000 units x P50 per unit) Variable expenses: 12-18 Year P400,000 Variable Costing Chapter 12 Variable cost of goods sold (8,000 units x P20 per unit) Variable selling and administrative (8,000 units x P4 per unit) Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative expenses Net operating income P160,000 32,000 P160,000 192,000 208,000 120,000 70,000 32,000 192,000 208,000 120,000 190,000 P 18,000 70,000 190,000 P 18,000 Requirement The reconciliation of the variable and absorption costing net operating incomes follows: Year Year Variable costing net operating income P18,000 P18,000 Add fixed manufacturing overhead costs deferred in inventory under absorption costing (2,000 units x P12 per unit) 24,000 Deduct fixed manufacturing overhead costs released from inventory under absorption costing (2,000 units x P12 per unit) (24,000) Absorption costing net operating income P42,000 P(6,000) Problem (Variable Costing Income Statement; Reconciliation) Requirement Sales (40,000 units × P33.75 per unit) P1,350,000 Variable expenses: Variable cost of goods sold (40,000 units × P16 per unit*) P640,000 Variable selling and administrative expenses (40,000 units × P3 per unit) 120,000 760,000 Contribution margin 590,000 Fixed expenses: Fixed manufacturing overhead 250,000 Fixed selling and administrative expenses 300,000 550,000 Net operating income P 40,000 * Direct materials 12-19 P10 Chapter 12 Variable Costing Direct labor Variable manufacturing overhead Total variable manufacturing cost P16 Requirement The difference in net operating income can be explained by the P50,000 in fixed manufacturing overhead deferred in inventory under the absorption costing method: Variable costing net operating income P40,000 Add: Fixed manufacturing overhead cost deferred in inventory under absorption costing: 10,000 units × P5 per unit in fixed manufacturing overhead cost 50,000 Absorption costing net operating income P90,000 IV Multiple Choice Questions 10 D B B B B C A B A A 11 12 13 14 15 16 17 18 19 20 B A C D B A C C B C 12-20 ... Margin - Final Less Fixed Costs and Expenses: Fixed Factory Overhead Fixed Marketing and Administrative Expenses Net Income P280,000 P 4,000 120 ,000 P124,000 12, 000 P 112, 000 5,000 117,000 P163,000... case, 12- 9 Chapter 12 Variable Costing absorption costing net operating income fluctuates wildly even though unit sales are the same each year and unit selling prices, unit variable costs, and. .. Sales - Actual Gross Profit Less: Selling and administrative expenses 12- 13 P 5,500 165,000 P170,500 16,500 P154,000 5,000 9,000 P168,000 P 112, 000 Chapter 12 Variable Costing Variable Fixed 28,000