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 $910. Selected data for the companys operations last year follow:

Units in beginning inventory		0
Units produced		300
Units sold		265
Units in ending inventory		35
Variable costs per unit:
Direct materials	$	115
Direct labor	$	325
Variable manufacturing overhead	$	45
Variable selling and administrative	$	20
Fixed costs:
Fixed manufacturing overhead	$	72,000
Fixed selling and administrative	$	34,000

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

Sales	$	241,150
Cost of goods sold		192,125
Gross margin		49,025
Selling and administrative expense		39,300
Net operating income	$	9,725

Required:

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

Total Manufacturing overhead in ending inventory: _____________

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

Ida Sidha Karya Company
Variable Costing Income Statement
Sales
Variable expenses:
Variable cost of goods sold
Variable selling and administrative expense
Contribution margin
Fixed expenses:
Fixed manufacturing overhead
Fixed administrative and selling expenses
Net operating income