lda Sidha Karva Company is a familyowned company located in

lda Sidha Karva Company is a family-owned company located in the village of Giaovac 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 $850. Selected data for the company\'s operations last year follow: Units in beginning inventory 0 250 Units Units sold Units in ending invent 25 ariable costs per unit Direct materials Direct labor aniable manufacturing ariable selling and administrative $ 40-1 $ 20 Fixed costs: Fixed manufacturing overh Fixed selling and administrative $ 60 The absorption costing income statement prepared by the company\'s accountant for last year appears below: Sales Cost of goods sold Gross margin Selling and administrative expense Net operatina income 91 157,500 24,500 9,250 Required 1. Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period Total fixed manufacturing overhead in ending invento $6,000 2. Prepare an income statement for the year using variable costing Ida Sidha Karya Company Variable Costing Income Statement Sales $ 191,250 Variable expenses Variable cost of goods sold $105,000 ariable selling and administrative expense 4,500 109,500 81,750 Contribution margin Fixed expenses Fixed manufacturing overhead Fixed selling and administrative expense 60,000 20,000 80,000 1,750 et operating income

Solution

1) Total fixed manufacturing overhead$ 60,000

Manufacturing overhead per unit. $ 240 ($60,000/250)

Ending Inventory. 25

Fixed manufacturing OH for 25 units. $ 6,000 (25*$240)

2)

Amount In Amount In

Sales (225 units X $850pu). $1,91,250

LESS: VARIABLE COST:

Direct Materials (225 units X $100pu) $22,500

Direct Labor (225 units X $320) . $72,000

Manufacturing Overhead (225 units X $40pu) $9,000

Selling & Administrative (225 units X $20pu) $4,500

Total Variable Cost $1,08,000

Contribution Margin (Total Sales - Total Variable Cost) $83,250

LESS: FIXED COSTS:

Fixed manufacturing Overhead $60,000

Fixed Selling & Administrative. $20,000

Total Fixed Cost $80,000

Net Operating Income $3,250