Question
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
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 $990. Selected data for the companys operations last year follow: |
Units in beginning inventory | 0 | |
Units produced | 240 | |
Units sold | 225 | |
Units in ending inventory | 15 | |
Variable costs per unit: | ||
Direct materials | $ | 120 |
Direct labor | $ | 330 |
Variable manufacturing overhead | $ | 50 |
Variable selling and administrative | $ | 25 |
Fixed costs: | ||
Fixed manufacturing overhead | $ | 72,000 |
Fixed selling and administrative | $ | 27,000 |
The absorption costing income statement prepared by the companys accountant for last year appears below: |
Sales | $ | 222,750 |
Cost of goods sold | 180,000 | |
Gross margin | 42,750 | |
Selling and administrative expense | 32,625 | |
Net operating income | $ | 10,125 |
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. |
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