Question
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
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 $880. Selected data for the companys operations last year follow: |
Units in beginning inventory | 0 | |
Units produced | 280 | |
Units sold | 240 | |
Units in ending inventory | 40 | |
Variable costs per unit: | ||
Direct materials | $ | 115 |
Direct labor | $ | 335 |
Variable manufacturing overhead | $ | 35 |
Variable selling and administrative | $ | 25 |
Fixed costs: | ||
Fixed manufacturing overhead | $ | 63,000 |
Fixed selling and administrative | $ | 23,000 |
The absorption costing income statement prepared by the companys accountant for last year appears below: |
Sales | $ | 211,200 |
Cost of goods sold | 170,400 | |
Gross margin | 40,800 | |
Selling and administrative expense | 29,000 | |
Net operating income | $ | 11,800 |
Required: |
1. | Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period. |
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2. Prepare an income statement for the year using variable costing.
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