Question

2. Ida Sidha Karya Company is a family-owned company located on the island of Bali in Indonesia. The company produces a handcrafted Balinese musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $860. Selected data for the company’s operations last year follow:

Ida Sidha Karya Company is a family-owned company located on the island of Bali in Indonesia. The company produces a handcrafted Balinese musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $860. Selected data for the company's operations last year follow: 320 285 35 Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs: Fixed manufacturing overhead Fixed selling and administrative 135 355 $ 64,000 $ 27,000 The absorption costing incc statement prepared by the company's accountant for last year appears below: Sales Cost of goods sold Gross margin Selling and administrative expense Net operating income $ 245,100 205,200 39,900 31,275 $ 8,625 Required: 1. Under absorption costing, how much fixed manufacturing overhead cost is included in the company's inventory at the end of last year? 2. Prepare an income statement for last year using variable costing.

1. Under absorption costing, how much fixed manufacturing overhead cost is included in the company's inventory at the end of last year?

2. Prepare an income statement for last year using variable costing.

Answer 1

1
Fixed manufacturing overhead cost included in inventory	7000	=64000/320*35
2
Variable costing Income Statement
Sales		245100
Variable expenses:
Variable cost of goods sold	148200		=285*(135+355+30)
Variable selling and administrative expenses	4275		=285*15
		152475
Contribution margin		92625
Fixed expenses:
Fixed manufacturing overhead	64000
Fixed selling and administrative expenses	27000
		91000
Net operating income		1625