Question

Ida Sidha Karya Company is a family-owned company located in the village of Gianyar on the island Bali in Indonesia. The company produces a handcrafted Balinese musical instrument called a gamela that is similar to a xylophone. The gamelans are sold for $880. Selected data for the company's operations last year follow: 280 255 25 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 105 315 A A A $ $ 35 40 $ 63,000 $ 32,000 The absorption costing income statement prepared by the company's accountant for last year appear below: Sales Cost of goods sold $ 224,400 173,400 Gross margin Selling and administrative expense 51,000 42,200 Net operating income $ 8,800 Required: 1. Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferr in inventory to the next period. Total fixed manufacturing overhead in ending inventory 2. Prepare an income statement for the year using variable costing. Ida Sidha Karya Company Variable Costing Income Statement Variable expenses: Fixed expenses:

Answer 1

1
Fixed manufacturing overhead cost included in inventory	5625	=63000/280*25
2
Variable costing Income Statement
Sales		224400
Variable expenses:
Variable cost of goods sold	116025		=255*(105+315+35)
Variable selling and administrative expenses	10200		=255*40
		126225
Contribution margin		98175
Fixed expenses:
Fixed manufacturing overhead	63000
Fixed selling and administrative expenses	32000
		95000
Net operating income		3175