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 to a Canadian importer for $980. Selected data for the companys operations last year follow:

Units in beginning inventory		0
Units produced		280
Units sold		265
Units in ending inventory		15
Variable costs per unit:
Direct materials	$	150
Direct labour	$	370
Variable manufacturing overhead	$	45
Variable selling and administrative	$	30
Fixed costs:
Fixed manufacturing overhead	$	70,000
Fixed selling and administrative	$	30,000

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

Sales	$	259,700
Cost of goods sold		215,975
Gross margin		43,725
Selling and administrative expense		37,950
Net operating income	$	5,775

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.