Ida Sidha Karya Company is a family-owned company located in the village of Glanyar 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		255
Units in ending inventory		25
Variable costs per unit:
Direct materials	$	105
Direct labor	$	315
Variable manufacturing overhead	$	35
Variable selling and administrative	$	40
Fixed costs:
Fixed manufacturing overhead	$	63,000
Fixed selling and administrative	$	32,000

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

Sales	$	224,400
Cost of goods sold		173,400
Gross margin		51,000
Selling and administrative expense		42,200
Net operating income	$	8,800

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:
		0
		0
Fixed expenses:
		0
		$0