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Exercise 7-2 (Algo) Variable Costing Income Statement; Explanation of Difference in Net Operating Income [LO7-2]

Ida Company produces a handcrafted 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. Under absorption costing, how much fixed manufacturing overhead cost is included in the company's inventory at the end of last year?

2. Prepare an income statement for last year using variable costing. NOTE: You will have a BLANK LINE prior to your cost totals on the income statement to format correctly in the Connect system.