Bharat Bicycle, located in India, produces an inexpensive yet rugged bicycle for use on crowded city streets. The company sells the bicycle for 540 rupees. (Indian currency is denominated in rupees, denoted by R.) Selected data for the companys operations last year follow:

Units in beginning inventory		0
Units produced		18,300
Units sold		16,600
Units in ending inventory		1,700
Variable costs per unit:
Direct materials	R	143
Direct labour	R	173
Variable manufacturing overhead	R	45
Variable selling and administrative	R	34
Fixed costs:
Fixed manufacturing overhead	R	1,207,800
Fixed selling and administrative	R	805,200

An absorption costing income statement prepared by the companys accountant appears below:

Sales (16,600 units R540 per unit)				R	8,964,000
Cost of goods sold:
Beginning inventory	R	0
Add cost of goods manufactured (18,300 units R ? per unit)		7,814,100
Goods available for sale		7,814,100
Less ending inventory (1,700 units R ? per unit)		725,900			7,088,200
Gross margin					1,875,800
Selling and administrative expenses:
Variable selling and administrative		564,400
Fixed selling and administrative		805,200			1,369,600
Operating income				R	506,200

Required:

1.	Determine how much of the ending inventory of R725,900 above consists of fixed manufacturing overhead cost deferred in inventory to the next period.

2.	Prepare an income statement for the year using the variable costing method.