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Exercise 4-2 (Algo) Variable Costing Income Statement; Explanation of Difference in Net Operating Income [LO4-2]...

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Exercise 4-2 (Algo) Variable Costing Income Statement; Explanation of Difference in Net Operating Income [LO4-2] 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 $900. Selected data for the companys operations last year follow: Units in beginning inventory 0 Units produced 300 Units sold 275 Units in ending inventory 25 Variable costs per unit: Direct materials $ 125 Direct labor $ 345 Variable manufacturing overhead $ 45 Variable selling and administrative $ 35 Fixed costs: Fixed manufacturing overhead $ 63,000 Fixed selling and administrative $ 25,000 The absorption costing income statement prepared by the companys accountant for last year appears below: Sales $ 247,500 Cost of goods sold 199,375 Gross margin 48,125 Selling and administrative expense 34,625 Net operating income $ 13,500 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.

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