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Ida Company produces a handcrafted musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $850. Selected data for
Ida Company produces a handcrafted musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $850. Selected data for the companys operations last year follow:
Units in beginning inventory | 0 | |
Units produced | 250 | |
Units sold | 225 | |
Units in ending inventory | 25 | |
Variable costs per unit: | ||
Direct materials | $ | 100 |
Direct labor | $ | 320 |
Variable manufacturing overhead | $ | 40 |
Variable selling and administrative | $ | 20 |
Fixed costs: | ||
Fixed manufacturing overhead | $ | 60,000 |
Fixed selling and administrative | $ | 20,000 |
The absorption costing income statement prepared by the companys accountant for last year appears below:
Sales | $ | 191,250 |
Cost of goods sold | 157,500 | |
Gross margin | 33,750 | |
Selling and administrative expense | 24,500 | |
Net operating income | $ | 9,250 |
Required:
2. Prepare an income statement for last year using variable costing.
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