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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 630 rupees.

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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 630 rupees. (Indian currency is denominated in rupees, denoted by R.) Selected data for the company's operations last year follow: o 13,000 11,600 1,400 R R 189 164 Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: Direct materials Direct labour Variable manufacturing overhead Variable selling and administrative Fixed costs: Fixed manufacturing overhead Fixed selling and administrative R. 70 R 44 R975,000 R650,000 An absorption costing income statement prepared by the company's accountant appears below: R7,308,000 Sales (11,600 units * R630 per unit) Cost of goods sold: Beginning inventory Add cost of goods manufactured (13,000 units R ? per unit) R 0 6,474,000 6,474,000 Goods available for sale Less ending inventory (1,400 units * R ? per unit) 697,200 5,776,800 1,531,200 Gross margin Selling and administrative expenses: Variable selling and administrative Fixed selling and administrative 510,400 650,000 1,160,400 Operating income R 370,800 Required: 1. Determine how much of the ending inventory of R697,200 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. Variable Costing Income Statement 20 Variable expenses: Variable cost of goods sold: RI 0 0 0 0 Fixed expenses: + 0 20 0

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