Question

Bharat Bicycle, located in India, produces an inexpensive yet rugged bicycle for use on crowded city streets. The company sells the bicycle for 695 rupees. (Indian currency is denominated in rupees, denoted by R.) Selected data for the company's operations last year follow: 11,200 9,100 2,100 172 194 Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: Direct materials Direct labour Variable manufacturing overhead Variable selling and administrative Fixed costs: Fixed manufacturing overhead Fixed selling and administrative R 41 R806,400 R 537,600 An absorption costing income statement prepared by the company's accountant appears below: unit) Sales (9,100 units * R695 per R6,324,500 Cost of goods sold: Beginning inventory RO Add cost of goods manufactured (11.200 units * R ? per unit) 5,510,400 5,510,400 as available for sale Less ending Inventory (2.100 units * R ? per unit) 1,033,200 4,477,200 1,847,300 Gross margin Selling and administrative expenses: Variable selling and administrative 373,100 < Prev 18 of 2

Answer 1

1)	Total fixed manufacturing overhead in ending inventory						151200
	(806400/11200)*2100
2)	Variable costing income statement
	sales					6,324,500
	Variable expenses:
	Variable cost of goods sold
	Beginning inventory				0
	Add Variable manufacturing costs				4704000
	goods available for sale				4704000
	less : ending inventory				882000
	Variable cost of goods sold					3822000
	variable selling and administrative					373100
	contribution margin					2,129,400
	fixed expenses:
	Fixed manufacturing overhead				806,400
	Fixed selling and administrative				537,600
						1,344,000
	operating income					785,400
	unit product cost=		DM+DL+VMOH
			420