Question

company's operations last year follow 7.14 points 250 235 Skipped 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 $ $ 135 345 $ 20 $65,000 $25,000 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 29,700 $ 12,600 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 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare an income statement for last year using variable costing. Ida Sidha Karya Company Variable Costing Income Statement Prev 1 of 7 !!! Next >

Answer 1

Answer to Requirement 1:

Fixed Manufacturing Overhead per unit = Fixed Manufacturing Overhead / Units Produced
Fixed Manufacturing Overhead per unit = $65,000 / 250
Fixed Manufacturing Overhead per unit = $260.00

Fixed Manufacturing Overhead included in ending inventory is $3,900 ($260.00 * 15).

Answer to Requirement 2:

223250 Ida Sidha Karya Company Variable Costing Income Statement Sales Less: Variable Expenses Variable Cost of Goods Sold 119850 Variable Selling and Administrative 4700 Total Variable Expenses Contribution Margin Less: Fixed Expenses Fixed Manufacturing Overhead 65000 Fixed Selling and Administrative 25000 Total Fixed Expenses Net Operating Income 124550 98700 90000 8700

Unit Product Cost = Direct Materials + Direct Labor + Variable Manufacturing Overhead
Unit Product Cost = $135 + $345 + $30
Unit Product Cost = $510

Variable Cost of Goods Sold = Unit Product Cost * Units Sold
Variable Cost of Goods Sold = $510 * 235
Variable Cost of Goods Sold = $119,850

Variable Selling and Administrative Expense = Variable Selling and Administrative Expense per unit * Units Sold
Variable Selling and Administrative Expense = $20 * 235
Variable Selling and Administrative Expense = $4,700