Question

Chapter 6

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 $950. Selected data for the company's operations last year follow: 270 235 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 110 330 A 30 A A 20 $ 81,000 $ 22,000 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 $ 223,250 180,950 42,300 26,700 $ 15,600 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.

Answer 1

PArt( A) Answer is $10500

explanation provided in attachment below

Statement Showing Fixed cost included in Inventory Cost of goods sold $180,950 Variable price per unit : Direct material Direct Labour Variable manufacturing Overhead 110 330 30 Total Variable price per unit : $470.00 Unit sold 235 Variabe cost for good sold $110,450.00 Fixed cost for cost of goods sold $70,500.00 (Cost of goods sold - Variabe cost for good sold) Fixed cost per unit $300.00 (Fixed cost for cost of goods sold / unit sold) Units in ending Inventory 35 Answer Fixed cost for units in ending Inventory $10,500.00 (Units in ending Inventory * Fixed cost per unit) Verfication : Total fixed cost less fixed cost of goods sold closing fixed cost 81000 70500 10500 ($81000 - $ 70500)

(b) Variable costing system

Particulars	Units	Rate per Unit		Amount($)	Working
Sales	235	950		223250	223250 / 235
Less Variable Product Costs:
Direct material	235	110	25850		235*110
Direct LAbour	235	330	77550		235*330
Variable manufacturing overhead	235	30	7050		235*30
Total Variable product Cost				-110450
Variable Mfg margin	235	480		112800	223250-110450
Less VAriable selling and administrative	235	20		-4700	235*20
Contibution margin	235	460		108100	112800-4700
Less fixed cost
Fixed manufacturing overhead			81000
Fixed selling and Administrative overhead			22000
Total fixed cost				-103000
Income				$5100	108100-103000