Ida Sidha Karya Company is a family-owned company located in the village of Gianyar on the island of Bali in Indonesia. The company produces a handcrafted Balinese musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $990. Selected data for the companys operations last year follow:

Units in beginning inventory		0
Units produced		250
Units sold		230
Units in ending inventory		20
Variable costs per unit:
Direct materials	$	145
Direct labor	$	365
Variable manufacturing overhead	$	40
Variable selling and administrative	$	25
Fixed costs:
Fixed manufacturing overhead	$	65,000
Fixed selling and administrative	$	29,000

The absorption costing income statement prepared by the companys accountant for last year appears below:

Sales	$	227,700
Cost of goods sold		186,300
Gross margin		41,400
Selling and administrative expense		34,750
Net operating income	$	6,650

Required:

1.	Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period.

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

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Hint #1