Ida Sidha Karya Company is a family-owned company located on theisland of Bali in Indonesia. The company produces a handcraftedBalinese musical instrument called a gamelan that is similar to axylophone. The gamelans are sold for $910. Selected data for thecompany’s operations last year follow:
| | |
| Units in beginning inventory | | 0 |
| Units produced | | 300 |
| Units sold | | 270 |
| Units in ending inventory | | 30 |
| Variable costs per unit: | | |
| Direct materials | $ | 140 |
| Direct labor | $ | 350 |
| Variable manufacturing overhead | $ | 35 |
| Variable selling and administrative | $ | 15 |
| Fixed costs: | | |
| Fixed manufacturing overhead | $ | 69,000 |
| Fixed selling and administrative | $ | 26,000 |
|
The absorption costing income statement prepared by thecompany’s accountant for last year appears below:
| | |
| Sales | $ | 245,700 |
| Cost of goods sold | | 203,850 |
| Gross margin | | 41,850 |
| Selling and administrative expense | | 30,050 |
| Net operating income | $ | 11,800 |
|
1. Under absorption costing, how much fixed manufacturingoverhead cost is included in the company's inventory at the end oflast year?
2. What is the amount of the difference in net operating incomebetween the two costing methods?
3. Prepare an income statement for last year using variablecosting.
- Fixed manufacturing overhead
- Fixed selling and administrative expenses
- Sales
- Units in beginning inventory
- Units in ending inventory
- Units produced
- Units sold
- Variable cost of goods sold
- Variable selling and administrative expenses
