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 $950. Selected data for the company’s operations last year follow:
|Units in beginning inventory||0|
|Units in ending inventory||35|
|Variable costs per unit:|
|Variable manufacturing overhead||$||30|
|Variable selling and administrative||$||20|
|Fixed manufacturing overhead||$||81,000|
|Fixed selling and administrative||$||22,000|
The absorption costing income statement prepared by the company’s accountant for last year appears below:
|Cost of goods sold||180,950|
|Selling and administrative expense||26,700|
|Net operating income||$||15,600|
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.
1) Fixed manufacturing cost per unit = Total Fixed manufacturing OH/Units produced
= $81,000/270 units = $300 per unit
Fixed cost included in ending inventory = 35 units*$300 per unit = $10,500
2) Variable Costing Income Statement (Amounts in $)
|Less: Variable cost of goods sold [235 units*($110+$330+$30)]||(110,450)|
|Less: Variable selling and administrative (235 units*$20)||(4,700)|
|Less: Fixed manufacturing Overhead||(81,000)|
|Less: Fixed selling and administrative||(22,000)|
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