Question

Ida Sidha Karya Company is a family-owned company located in the village of Gianyar 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 $870. Selected data for the company's operations last year follow: 260 30 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 A A 15 A $ 65,000 $ 21,000 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 200, 100 166,750 33, 350 24,450 8,900 Required: 1. Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period. Total fixed manufacturing overhead in ending inventory

Answer 1

Under abosorption Costing How Much Fixed Manaufacturing Cost is included in the Company ending Inventory = (65000/260)*30 7,500 2 475 200100 2) Assuming the Firm Using the Variable Cositng Variable Costing Calculation of Unit cost Under Variable Costing Unit Product Cost (105+325+45) Variable Costing income Statement Sales (230*870) LESS: Variable Expense Variable Cost of Goods Sold (230*475) Variable Selling and Administrative Expense(230*15) Total Varible Expenses Total Contribution Margin Less:Fixed Expenses Fixed manufacturing Overheads | Fixed Selling and Administrative Expenses Total fixed Expenses Net operating income (loss) 109250 3450 112700 87400 65000 21000 86000 1400