Bharat Bicycle, located in India, produces an inexpensive yet rugged bicycle for use on crowded city streets. The company sells the bicycle for 585 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		16,850
Units sold		12,900
Units in ending inventory		3,950
Variable costs per unit:
Direct materials	R	139
Direct labour	R	176
Variable manufacturing overhead	R	89
Variable selling and administrative	R	52
Fixed costs:
Fixed manufacturing overhead	R	960,450
Fixed selling and administrative	R	640,300

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

Sales (12,900 units R585 per unit)				R	7,546,500
Cost of goods sold:
Beginning inventory	R	0
Add cost of goods manufactured (16,850 units R ? per unit)		7,767,850
Goods available for sale		7,767,850
Less ending inventory (3,950 units R ? per unit)		1,820,950			5,946,900
Gross margin					1,599,600
Selling and administrative expenses:
Variable selling and administrative		670,800
Fixed selling and administrative		640,300			1,311,100
Operating income				R	288,500

equired:

1.	Determine how much of the ending inventory of R1,820,950 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 RI Variable expenses: Variable cost of goods sold: R 0 0 0 0 Fixed expenses: 0 R 0