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 $850 Selected data for the company's operations last year follow: beginning inventory Units in Units produced Units sold Units in ending inventory Variable costs per unit: 250 225 25 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative $100 $320 40 20 Fixed costs: Fixed manufacturing overhead Fixed selling and administrative $60,000 20,000 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 operating income $ 191,250 157,500 33,750 24,500 $9,250

Explanation / Answer

Variable costing income statement :

Sales 191250 Variable expenses Direct material 22500 Direct labour 72000 Variable manufacturing overhead 9000 Variable selling and administrative expense 4500 Total variable expense 108000 Contribution margin 83250 Fixed manufacturing overhead 60000 Fixed selling and administrative expense 20000 Total fixed expense 80000 Net operating income (loss) 3250

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