1. Xylo produces xylophones. Each xylophone is sold for $850. Selected data for the companys operations last year follow:

Units in beginning inventory 0

Units Produced 250

Units Sold 225

Units in ending inventory 25

Variable Costs per unit:

Direct materials $100

Direct labor $320

Variable Mfg Overhead $40

Variable Selling & Admin $20

Fixed Costs:

Fixed Mfg Overhead $60,000

Fixed Selling & Admin $20,000

1. Refer to Xylo above. The absorption costing income statement prepared by the companys accountant for last year appears below:

Sales $191,250

Cost of Goods Sold $157,500

Gross Margin $33,750

Selling & Admin Expense $24,500

Net Operating Income $9,250

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. Explain the difference in net operating income between the two costing methods (1-2 sentences is fineIm not looking for an essay).