Question

*** I NEED THE SOLUTIONS ASAP PLZ*****

1. 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 $980. Selected data for the company’s operations last year follow:

Units in beginning inventory		0
Units produced		280
Units sold		265
Units in ending inventory		15
Variable costs per unit:
Direct materials	$	150
Direct labor	$	370
Variable manufacturing overhead	$	45
Variable selling and administrative	$	30
Fixed costs:
Fixed manufacturing overhead	$	70,000
Fixed selling and administrative	$	30,000

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

Sales	$	259,700
Cost of goods sold		215,975
Gross margin		43,725
Selling and administrative expense		37,950
Net operating income	$	5,775
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.

2. Lynch Company manufactures and sells a single product. The following costs were incurred during the company’s first year of operations:

Variable costs per unit:
Manufacturing:
Direct materials	$	14
Direct labor	$	3
Variable manufacturing overhead	$	1
Variable selling and administrative	$	1
Fixed costs per year:
Fixed manufacturing overhead	$	330,000
Fixed selling and administrative expenses	$	240,000

During the year, the company produced 33,000 units and sold 24,000 units. The selling price of the company’s product is $44 per unit.

Required:

1. Assume that the company uses absorption costing:

a. Compute the unit product cost.

b. Prepare an income statement for the year.

2. Assume that the company uses variable costing:

a. Compute the unit product cost.

b. Prepare an income statement for the year.

3.Royal Lawncare Company produces and sells two packaged products—Weedban and Greengrow. Revenue and cost information relating to the products follow:

	Product
	Weedban		Greengrow
Selling price per unit	$	10.00	$	39.00
Variable expenses per unit	$	2.80	$	14.00
Traceable fixed expenses per year	$	136,000	$	36,000

Common fixed expenses in the company total $108,000 annually. Last year the company produced and sold 39,000 units of Weedban and 23,500 units of Greengrow.

Required:

Prepare a contribution format income statement segmented by product lines.

Answer 1

Answer to Question 1:

Answer a.

Fixed Manufacturing Overhead per unit = Fixed Manufacturing Overhead / Units produced
Fixed Manufacturing Overhead per unit = $70,000 / 280
Fixed Manufacturing Overhead per unit = $250.00

Fixed Manufacturing Overhead included in Ending Inventory = Fixed Manufacturing Overhead per unit * Units in ending inventory
Fixed Manufacturing Overhead included in Ending Inventory = $250,.00 * 15
Fixed Manufacturing Overhead included in Ending Inventory = $3,750

Answer b.

Unit product cost = Direct materials + Direct labor + Variable manufacturing overhead
Unit product cost = $150 + $370 + $45
Unit product cost = $565