Bharat Bicycle, located in India, produces an inexpensive yet rugged bicycle for use on crowded city streets. The company sells the bicycle for 568 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		18,050
Units sold		15,600
Units in ending inventory		2,450
Variable costs per unit:
Direct materials	R	187
Direct labour	R	199
Variable manufacturing overhead	R	39
Variable selling and administrative	R	24
Fixed costs:
Fixed manufacturing overhead	R	1,028,850
Fixed selling and administrative	R	685,900

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

Sales (15,600 units R568 per unit)				R	8,860,800
Cost of goods sold:
Beginning inventory	R	0
Add cost of goods manufactured (18,050 units R ? per unit)		8,700,100
Goods available for sale		8,700,100
Less ending inventory (2,450 units R ? per unit)		1,180,900			7,519,200
Gross margin					1,341,600
Selling and administrative expenses:
Variable selling and administrative		374,400
Fixed selling and administrative		685,900			1,060,300
Operating income				R	281,300

Required:

1.	Determine how much of the ending inventory of R1,180,900 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.

Variable Costing Income Statement R Variable expenses: Variable cost of goods sold: R 0 0 0 0 Fixed expenses: 0 R 0