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 $910. Selected data for the company's operations last year follow: 270 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 148 358 $ 69.ee $ 26.ee 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 $ 245.789 203.850 41,850 30.950 $ 11,800 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare an income statement for last year using variable costing. $ 245,700 Ida Sidha Karya Company Variable Costing Income Statement Sales Variable expenses: Variable cost of goods sold Variable selling and administrative expense | Units in beginning inventory 245.700 Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative expense Net operating income $ 245,700 < Required 1 Required 2)

Answer 1

1) Under absorption costing, unit cost of goods manufactured shall consider both variable and fixed mfg. costs incurred to produce the number goods. Therefore, Fixed manufacturing overhead Units produced Fixed mfg. overhead per unit Number of units in ending inventory Fixed mfg. OH included in ending inventory $69,000 300 $230 ($69000 / 300 units produced = $230] 30 [0 + 300 - 270] $6,900 (30 units x $230]

2) Under variable costing, unit product cost shall consider only variable manufacturing costs incurred to produce the number goods. As a result, fixed mfg. overhead costs shall be charged as expense in the year in which they were incurred. $245,700 [270 units x $910] [270 units x ($140 + $350 + $35)] [270 units x $15] $0 Ida Sidha Karya Company Variable Costing Income Statement Sales Revenue Variable expenses: Variable cost of goods sold $141,750 Variable selling expense $4,050 Leave this row blank Leave this row blank $0 Contribution Margin Fixed expenses: Fixed manufacturing costs $69,000 Fixed administrative expense $26,000 Leave this row blank Leave this row blank $0 Net Operating Income $145,800 $99,900 [$245700 - $145800] $95,000 $4,900 [$99900 - $95000]