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 $860. 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 320 Units sold 285 Units in ending inventory 35 Variable costs per unit: Direct materials $ 135 Direct labor $ 355 Variable manufacturing overhead $ 30 Variable selling and administrative $ 15 Fixed costs: Fixed manufacturing overhead $ 64,000 Fixed selling and administrative $ 27,000 2 da Sicha Karys Company s a famtyowned compary located in the vilage of Gianyar on the land of Rall in Indonesa The company Theicting income statement oresared by the copony'sactant for lbst year apeas belw

Explanation / Answer

1 Fixed manufacturing overhead included in the company's inventory = 64000/320*35= $7000 2 Sales 245100 Variable expenses: Variable cost of goods sold 148200 Variable selling and administrative expenses 4275 Total Variable expenses 152475 Contribution margin 92625 Fixed expenses: Fixed manufacturing overhead 64000 Fixed selling and administrative expenses 27000 Total Fixed expenses 91000 Net operating income(loss) 1625

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