Question

Ida Sidha Karya Company is a family-owned company located 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 company’s 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 company’s 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.

Answer 1

Answer to Question 1:

Answer to Question 2: