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?

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.

I got some right and some wrong. can someone please explain and show me how to do this? Thanks

These are what I have for titles to pick from when making the income statement

Fixed manufacturing overhead
Fixed selling and administrative expense
Sales
Units in beginning inventory
Units in ending inventory
Units produced
Units sold
Variable cost of goods sold
Variable selling and administrative expense

Units in beginning inventory 0 Units produced 250 Units sold 230 Units in ending inventory 20 Variable costs per unit: Direct materials $ 145 Direct labor $ 365 Variable manufacturing overhead $ 40 Variable selling and administrative $ 25 Fixed costs: Fixed manufacturing overhead $ 65,000 Fixed selling and administrative $ 29,000

Explanation / Answer

Answer:

1

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

Answer:$5200

Working notes for the above answer is as under

Fixed manufacturing overhead cost per unit

= Fixed manufacturing overhead cost / Number of units produced

=65,000/250

=$260 Per unit

Units in ending inventory=20 units

Fixed manufacturing overhead cost is included in the company's inventory at the end of last year

=20*260

=$5200

_______________________________________

2

Ida Sidha Karya Company

Variable Costing Income Statement

Sales (990*230)

227700

Less: Variable expenses:

Direct Material (145*230)

33350

Direct Labor(365*230)

83950

Variable Manufacturing overhead

(40*230)

9200

Variable selling and administrative exp

(25*230)

5750

Total variable cost

132,250

Contribution margn

95,450

Fixed expenses

Fixed manufacturing overhead

65000

Fixed selling and administrative expenses

29000

Total Fixed expenses

94000

Net operating income

$1,450

Ida Sidha Karya Company

Variable Costing Income Statement

Sales (990*230)

227700

Less: Variable expenses:

Direct Material (145*230)

33350

Direct Labor(365*230)

83950

Variable Manufacturing overhead

(40*230)

9200

Variable selling and administrative exp

(25*230)

5750

Total variable cost

132,250

Contribution margn

95,450

Fixed expenses

Fixed manufacturing overhead

65000

Fixed selling and administrative expenses

29000

Total Fixed expenses

94000

Net operating income

$1,450

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