Ida Sidha Karya Company is a family-owned company located in the village of Gian

Question

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 $990. Selected data for the company’s operations last year follow:

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

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.

Units in beginning inventory 0 Units produced 200 Units sold 180 Units in ending inventory 20 Variable costs per unit: Direct materials $ 120 Direct labor $ 340 Variable manufacturing overhead $ 40 Variable selling and administrative $ 30 Fixed costs: Fixed manufacturing overhead $ 56,000 Fixed selling and administrative $ 24,000

Explanation / Answer

1. Under absorption costing, how much fixed manufacturing overhead cost is included in the company's inventory at the end of last year

Fixed manufacturing overhead included in ending inventory = 56000/200*20 = $5600

2. Prepare an income statement for last year using variable costing.

Sales 178200 Less: Variable expense Direct material (180*120) 21600 Direct labour (180*340) 61200 Variable manufacturing overhead (180*40) 7200 Variable selling and administrative (180*30) 5400 Total variable expense 95400 Contribution margin 82800 Less: Fixed cost Fixed manufacturing overhead 56000 Fixed selling and administrative 24000 Total Fixed cost 80000 Net operating income 2800

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.