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 $950. Selected data for the company’s operations last year follow:

Units in beginning inventory		0
Units produced		250
Units sold		230
Units in ending inventory		20
Variable costs per unit:
Direct materials	$	125
Direct labor	$	335
Variable manufacturing overhead	$	55
Variable selling and administrative	$	30
Fixed costs:
Fixed manufacturing overhead	$	75,000
Fixed selling and administrative	$	15,000

The absorption costing income statement prepared by the company’s accountant for last year appears below:

Sales	$	218,500
Cost of goods sold		187,450
Gross margin		31,050
Selling and administrative expense		21,900
Net operating income	$	9,150
2. Prepare an income statement for last year using variable costing

Answer 1

Answer

--Requirement asked

Variable COsting Income Statement
Sales	[230 units x $ 950]	$218,500
Less: Variable costs
Direct material 230 x $ 125	$28,750
Direct Labor 230 x $ 335	$77,050
Variable manufacturing overhead	$12,650
Variable selling & admin	$6,900
Total Variable cost		$125,350
Contribution margin		$93,150
Less: Fixed Cost
Fixed manufacturing overhead	$75,000
Fixed selling & admin	$15,000
Total Fixed expenses		$90,000
Net Operating Income		$3,150