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 $840. Selected data for the companys operations last year follow:

Units in beginning inventory		0
Units produced		300
Units sold		275
Units in ending inventory		25
Variable costs per unit:
Direct materials	$	100
Direct labor	$	310
Variable manufacturing overhead	$	30
Variable selling and administrative	$	35
Fixed costs:
Fixed manufacturing overhead	$	66,000
Fixed selling and administrative	$	31,000

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

Sales	$	231,000
Cost of goods sold		181,500
Gross margin		49,500
Selling and administrative expense		40,625
Net operating income	$	8,875

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.

Ida Sidha Karya Company Variable Costing Income Statement Variable expenses: Fixed expenses