Question

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 $990. Selected data for the company's operations last year follow: A 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 145 365 A A A 25 $ 65,000 $ 29,000 The absorption costing income 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 $ 227,700 186,300 41,400 34,750 $ 6,650

Answer 1

1 Under abosorption Costing How Much Fixed Manaufacturing Cost is included in the Company ending Inventory = (65000/250)*30 5,200 2 550 227700 2) Assuming the Firm Using the Variable Cositng Variable Costing Calculation of Unit cost Under Variable Costing Unit Product Cost (145+365+40) Variable Costing income Statement Sales (230*990) LESS: Variable Expense Variable Cost of Goods Sold (230*550) Variable Selling and Administrative Expense(230*25) Total Varible Expenses Total Contribution Margin Less:Fixed Expenses Fixed manufacturing Overheads Fixed Selling and Administrative Expenses Total fixed Expenses Net operating income (loss) 126500 5750 132250 95450 65000 29000 94000 1450