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 $870. Selected data for the company's operations last year follow: 260 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 45 $ 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. 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. What is the amount of the difference in net operating income between the two costing methods? Complete this question by entering your answers in the tabs below. Reg 1 Req 2A Req 2B Under absorption costing, how much fixed manufacturing overhead cost is included in the company's inventory at the end of last year? Fixed manufacturing overhead cost included in inventory Req 2A >

Answer 1

1
Fixed manufacturing overhead cost included in inventory	7500	=65000/260*30
2
Variable costing Income Statement
Sales		200100
Variable expenses:
Variable cost of goods sold	109250		=230*(105+325+45)
Variable selling and administrative expenses	3450		=230*15
		112700
Contribution margin		87400
Fixed expenses:
Fixed manufacturing overhead	65000
Fixed selling and administrative expenses	21000
		86000
Net operating income		1400
3
Amount of the difference in net Operating income	7500	=8900-1400