Question

Ida 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 $990. Selected data for the company’s operations last year follow:

Units in beginning inventory		0
Units produced		250
Units sold		230
Units in ending inventory		20
Variable costs per unit:
Direct materials	$	145
Direct labor	$	365
Variable manufacturing overhead	$	40
Variable selling and administrative	$	25
Fixed costs:
Fixed manufacturing overhead	$	65,000
Fixed selling and administrative	$	29,000

The absorption costing income statement prepared by the company’s accountant for last year appears below:

Sales	$	227,700
Cost of goods sold		186,300
Gross margin		41,400
Selling and administrative expense		34,750
Net operating income	$	6,650

Required:

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

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

	Fixed manufacturing overhead cost included in inventory $5,200selected answer correct

2. Prepare an income statement for last year using variable costing.

I got some right and some wrong. can someone please explain and show me how to do this? Thanks

These are what I have for titles to pick from when making the income statement

Fixed manufacturing overhead
Fixed selling and administrative expense
Sales
Units in beginning inventory
Units in ending inventory
Units produced
Units sold
Variable cost of goods sold
Variable selling and administrative expense

Ida Sidha Karya Company Variable Costing Income Statement Salesselected answer correct $227,700selected answer correct Variable expenses:selected answer correct Units soldselected answer incorrect $33,350selected answer incorrect Units producedselected answer incorrect 83,950selected answer incorrect Variable cost of goods soldselected answer correct $9,200selected answer incorrect Variable selling and administrative expenseselected answer correct $5,750selected answer correct 132,250 Contribution marginselected answer correct 95,450 Fixed expenses:selected answer correct Fixed manufacturing overheadselected answer correct 65,000selected answer correct Fixed selling and administrative expenseselected answer correct 29,000selected answer correct not attempted not attempted Units in ending inventoryselected answer incorrect not attempted 94,000 Net operating incomeselected answer correct $1,450

Answer 1

1

Under absorption costing, how much fixed manufacturing overhead cost is included in the company's inventory at the end of last year

Answer:$5200

Working notes for the above answer is as under

Fixed manufacturing overhead cost per unit

= Fixed manufacturing overhead cost / Number of units produced

=65,000/250

=$260 Per unit

Units in ending inventory=20 units

Fixed manufacturing overhead cost is included in the company's inventory at the end of last year

=20*260

=$5200

_______________________________________

2

Ida Sidha Karya Company
Variable Costing Income Statement
Sales (990*230)		227700
Less: Variable expenses:
Direct Material (145*230)	33350
Direct Labor(365*230)	83950
Variable Manufacturing overhead (40*230)	9200
Variable selling and administrative exp (25*230)	5750
Total variable cost		132,250
Contribution margn		95,450
Fixed expenses
Fixed manufacturing overhead	65000
Fixed selling and administrative expenses	29000
Total Fixed expenses		94000
Net operating income		$1,450