Question

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 $990. Selected data for the company's operations last year follow: Units in beginning inventory Units produced Units sold 200 180 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 20 120 340 40 30 $ $56,000 $ 24,000 The absorption costing income statement prepared by the company's accountant for last year appears below: Sales $178,200 140,400 Cost of goods sold Gross margin Selling and administrative expense 37,800 29,400 Net operating income 8,400 A

Answer 1

1 Under abosorption Costing How Much Fixed Manaufacturing Cost is included in the Company ending Inventory = (24000/200) 20 5,600 2 2) Assuming the Firm Using the Variable Cositng Variable Costing Calculation of Unit cost Under Variable Costing Unit Product Cost (120+340+40) 500 Variable Costing income Statement Sales (180*990) LESS: Variable Expense Variable Cost of Goods Sold (180*500) Variable Selling and Administrative Expense(180*30) Total Varible Expenses Total Contribution Margin Less:Fixed Expenses Fixed manufacturing Overheads Fixed Selling and Administrative Expenses Total fixed Expenses Net operating income (loss) 178200 90000 5400 95400 82800 56000 24000 80000 2800