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 $840. Selected data for the company's operations last year follow Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: 300 275 25 Direct materials Direct labor Variable manufacturing overhead $100 $310 $30 Variable selling and administrative $35 Fixed costs: Fixed manufacturing overhead Fixed selling and administrative $66,000 $31,000 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 $231,000e 181,500 49,500 40,625 $ 8,875

Explanation / Answer

1 Fixed manufacturing overhead cost in Company's Inventory Total fixed manufacturing overhead 66000 Total units Produced 300 Total fixed manufacturing overhead per unit 220 Fixed manufacturing OH in Inventory 5500 (25*220) 2 Variable costing Income Statement Sales 231000 Variable Expenses Direct material 27500 Direct labor 85250 Variable manufacturing overhead 8250 Variable selling and administrative 9625 Total variable expenses 130625 Contribution margin 100375 Less: Fixed Expenses Fixed amnufacturing overhead 66000 Fixed selling and administrative expense 31000 Total fixed expenses 97000 Net Operating Income 3375

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