Question

da 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 $652. Selected data for the company’s operations last year follow:

Units in beginning inventory		0
Units produced		17,000
Units sold		14,000
Units in ending inventory		3,000
Variable costs per unit:
Direct materials	$	110
Direct labor	$	320
Variable manufacturing overhead	$	49
Variable selling and administrative	$	23
Fixed costs:
Fixed manufacturing overhead	$	900,000
Fixed selling and administrative	$	480,000

Required:

1. Assume that the company uses absorption costing. Compute the unit product cost for one gamelan. (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

2. Assume that the company uses variable costing. Compute the unit product cost for one gamelan.

Answer 1

Income Statement - Absorption costing :
Particulars :	Calculation	Amount $
Sales	14000*652	9128000
Less: cost of goods sold:
Direct Materials	14000*110	1540000
Direct Labor	14000*320	4480000
Manufacturing cost:
Variable	14000*49	686000
Fixed	900000*14000/17000	741176
Total COGS		7447176
Gross Profit		1680823
Less: Selling and Admin expenses:
Variable	14000*23	322000
Fixed		480000
Total Selling and admin expenses:		802000
Net Operating Income		878823
Income Statement - Variable costing :
Particulars :	Per unit $	Amount $
Sales (14000 units)	652	9128000
Less: Variable expenses:
Direct Materials	110	1540000
Direct Labor	320	4480000
Variable Manufacturing costs	49	686000
Variable Selling and Admin expenses	23	322000
Total Variable costs:	502	7028000
Contribution	150	2100000
Less: Fixed expenses:
Manufacturing costs		900000
Selling and Admin expenses		480000
Total Fixed expenses:		1380000
Net Operating Income		720000