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Bharat Bicycle, located in India, produces an inexpensive yet rugged bicycle for use on crowded city streets. The company sells the bicycle for 528 rupees.

Bharat Bicycle, located in India, produces an inexpensive yet rugged bicycle for use on crowded city streets. The company sells the bicycle for 528 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 13,400
Units sold 10,600
Units in ending inventory 2,800
Variable costs per unit:
Direct materials R 121
Direct labour R 157
Variable manufacturing overhead R 48
Variable selling and administrative R 22
Fixed costs:
Fixed manufacturing overhead R 924,600
Fixed selling and administrative R 616,400

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

Sales (10,600 units R528 per unit) R 5,596,800
Cost of goods sold:
Beginning inventory R 0
Add cost of goods manufactured
(13,400 units R ? per unit)
5,293,000



Goods available for sale 5,293,000
Less ending inventory
(2,800 units R ? per unit)
1,106,000 4,187,000






Gross margin 1,409,800
Selling and administrative expenses:
Variable selling and administrative 233,200
Fixed selling and administrative 616,400 849,600






Operating income R 560,200







Required:
1.

Determine how much of the ending inventory of R1,106,000 above consists of fixed manufacturing overhead cost deferred in inventory to the next period.

total fixed manufacturing overhead in ending inventory R -------

2.

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

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