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

270

Units in ending inventory

30

Variable costs per unit:

Direct materials

$

140

Direct labor

$

350

Variable manufacturing overhead

$

35

Variable selling and administrative

$

15

Fixed costs:

Fixed manufacturing overhead

$

69,000

Fixed selling and administrative

$

26,000

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

Sales	$	245,700
Cost of goods sold		203,850
Gross margin		41,850
Selling and administrative expense		30,050
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.

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