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 $980. Selected data for the company's operations last year follow 240 225 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 360 35 20 $ 66,080 $ 28,000 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 220,500 182,250 38,250 32,500 5,750 $ 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 Under absorption costing, how much fixed manufacturing overhead cost is included in the company's inventory at the end last year? Fixed manufacturing overhead cost included in inventory Required Required 2 > < Prey 2 of 8 Next >

Answer 1

1)	Fixed Manu Oh included =			$ 66000 x 225/240
			=	$ 61,875.00

2)	Variable Costing Income Statement
	Sales			($ 980 x 225)			$ 220,500.00
Less:	Variable Expenses
	Direct Materials			($ 140 x 225)		$ 31,500.00
	Direct Labor			($ 360 x 225)		$ 81,000.00
	Variable Manu. OH			($ 35 x 225)		$   7,875.00
	Variable Selling & Adm. OH			($ 20 x 225)		$   4,500.00	$ 124,875.00
	Contribution Margin						$   95,625.00
	Fixed Costs
	Fixed Manu. OH					$ 66,000.00
	Fixed Selling & Adm. OH					$ 28,000.00	$   94,000.00
	Net Operating Income						$     1,625.00

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