Management accounting

Variable Costing
Scenario 1: video on recession
(PWEDE DIN REPORTER SA NEWS-ABOUT RECESSION AND ITS EFFECT
ON MINING INDUSTRY)Spoof ng HOT ISSUE
1: at ang susunod naman na balita ay tungkol sa World RECESSION.
2: ay mukhang nakakagutom yang topic na yan ah!
3. baket?
2: kase diba, kapag kumakain ka, kadaRECESS yon?
3: hay nako, panoorin na lang naten ang aking interview with a very famous
economist sa bansa.
Lahat: video, pasok!
Interview:
2: good morning maam, everybody is worrying about the world recession. And
now, everybody is asking its effect in our economy. What can you say about this?
Economist: well, we cannot solve it right away. Even the US is really affected and
many factories there are closing because of it. All i can say is that, companies should
expect lesser sales. Many factories will shut down. This is true in all industry. And
many people will suffer.
2: thank you very much maam for your time. Back to studio.
(studio)
1: dito na nagtatapos ang mga nagbabagang balita sa...
Lahat: HOT ISSUE
Scenario 2: (VP SALES OFFICE)
Sales agent: (Nagpapanic-napanuod ung balita) boss! We have a big problem!
VP SALES: (kalmado lang) What? What is it?
Sales agent: Boss! Were affected by the recession. We had forecasted that we will have
20% lesser sales compared to the last year.
VP SALES: 20% lang naman pala eh.
(biglang violent reaction). 20%? Why are you telling me this only now?
OMG! How about my bonus this year? How about my car loan? How
about my trip in Europe? What about me? Waaahhh!
Sales agent: Boss! Boss! Boooosss!!! (niyugyug si VP sales at natigilan siya sa
pagpapanic).KALMA lang boss!

VP SALES: dont touch me. I need to call my bessy about this. He will be insane too.
Alright! You can leave me now.(kinuha ang CP at tumawag kay VP PROD.).
On the phone:
VP PROD: hello? Bessy? Why did you call?
VP SALES: Bessy, we have a problem! Lets meet.
VP PROD: ok bessy.
Scenario 3:
( VP PROD and VP SALes- magbebeso beso)
VP SALES: hi bessy! Kamusta?
VP PROD: Whats the problem?
VP SALES: oh yeah! I forgot. Dont be shocked bessy. (VP PROD- attentive lang) Our
sales volume will be 20% less than the 400,000 units we mined and sold last year. So, we
may as well forget about year-end bonuses.( SAD FACE)
VP PROD: ( no reaction) so?
VP SALES: what? Its ok with you? Youre not going to have a violent reaction like me?
Its about our bonus my friend.
VP PROD: Hmm. Its ok with me. Dont worry my friend, sagot kita. Hehe( mukhang
may evil plan)
VP SALES: i like how you look bessy. Tell me, what is your plan?
COMMERCIAL BREAK
Scenario 4:
President: please prepare the board meeting. You know what to do.
Secretary: yes sir. (tatawag tawag sa phone)
President: (bumalik) by the way, i already allowed the VP FINANCE to take maternity
leave. For the mean time, i will appoint the comptroller to take her position. she needs to
be there too in the meeting. You know her right?
Secretary: yes sir! Shes a CPA and very ethical. Everybody here respects her and
everybody knows shes smart.
President: alright, i will go now to the boards room.
Scenario 5:
(back to VP PRODs plan)
VP SALES: whats your plan?
VP PROD: its very easy bessy. Well just pump the inventories up by mining 500,000
units. There is plenty of storage area in the warehouse. You know what i mean my friend.
VP SALES: ( nagulat sa plan). Thats very brilliant. But.... (nakokonsensya), you know
bessy, well never get away with it. The president will see what we are doing.
VP PROD: no, he knows nothing about accounting. Let me handle it and well still get
our bonuses. ( confident sa plano)
VP SALES: ok, so what about our report today? Are you ready?

VP PROD: i will be doing some adjustments then i will go. Its a good thing that you say
it just before i deliver the budgeted production. Youre really useful. You go first.
Scenario 6:
(board meeting)
President: lets start our meeting.(PRAYER PA BA?)I would like to hear first our
forecasted sales for the yeat from our VP SALES.
VP PROD: ( tumingin tingin sa paligid, nakita lang na officer ay si pres. At VP Sales.)
bessy, its good that VP FINANCE is on leave. Our plan will be successful.
VP SALES: (may powerpoint)
We are planning to retain the selling cost per unit, sir. As you heard from the news, our
economy is suffering because of recession. We cannot increase the selling price per unit,
because our market share will go down. And we are very sorry to tell you that, we had
forecasted that our sales will be 20% lesser compared to last year.
President: Thats too bad. Ok, Let me hear the budget for production.
VP PROD: (nagrereport ng production budget)
As you can see in the income statement, the variable unit cost is 15pesos and the fixed
cost is 8M pesos. This year, we are planning to retain those figures. And we have a good
news, We found more mineral deposits. Because of this, we can increase the production
this year to 500,000 units from 400,000units last year and the fixed cost per unit will
decrease.
VP FINANCE: (biglang dumating, walang nakapansin, at pinag-aralan ang report)
President: its good that we can increase the production, but i am worrying if we can
operate this year with an income. We heard that our sales will be less than last year, and
since we are producing more, i expect more cost to be incurred.
VP PROD: dont worry about that president. I already computed our income assuming we
meet all the reported figures. We will still have an income of 5.2M., even enough to meet
our quota for bonuses.
President: i am impressed with your computations. Its really good secure our income but i
would like to hear some advice in this matter from VP FINANCE.
VP SALES AND VP PROD( shocked)
VP PROD: who is she? I hope she is not a CPA.

COOMERCIAL BREAK
VP FINANCE: im sorry i was late mr. President. I only received the call a while ago.
Anyway, i would like to ask VP PROD if he knows about variable costing.
VP PROD: ( boasting) of course, i am a degree holder. Thats very simple, i know
variable costing very well.And i even got perfect score in our exam before.
VP FINANCE: do you know absorption costing?
VP SALES: wait a minute, no, are you questioning the intelligence of our VP PROD? He
knows absorption costing for your info.
VP FINANCE: no, i am questioning his integrity. And now, i can sense conspiracy. Mr.
President, i have to inform you that managers can manipulate income to have bonuses by
using absorption costing. And, as the way i saw it, they use absorption costing to deceive
you in their computed net income so that you will approve their report. I have computed
the firms true income using variable costing a while ago. You will be shocked, because
the true net income is very far from their computed net income.
President: how can this be? What caused the difference?
VP PROD: thats very simple, the fixed cost in the ending inventory will be deferred to
the next period and of course, because of the fixed cost in the beginning inventory.
VP FINANCE: it seems that you know that very well. And i wonder why you did not
report that earlier.
VP SALES: ( nadulas) of course, that was our plan. Ooopppss!
President: everything is cleared to me now, VP SALES AND VP PROD, i would like to
see your resignation letter at my desk tomorrow. VP FINANCE, good job, you did not
fail me on my appointment to you. As a reward, expect promotion from me. Meeting is
adjourned.