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 $910. 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. Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period.

Total Manufacturing overhead in ending inventory: _____________

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

Units in beginning inventory 0 Units produced 300 Units sold 265 Units in ending inventory 35 Variable costs per unit: Direct materials $ 115 Direct labor $ 325 Variable manufacturing overhead $ 45 Variable selling and administrative $ 20 Fixed costs: Fixed manufacturing overhead $ 72,000 Fixed selling and administrative $ 34,000

Explanation / Answer

1 Total Manufacturing overhead in ending inventory = 72000/300*35= $8400 2 Ida Sidha Karya Company Variable Costing Income Statement Sales 241150 Variable expenses: Variable cost of goods sold 128525 Variable selling and administrative expense 5300 133825 Contribution margin 107325 Fixed expenses: Fixed manufacturing overhead 72000 Fixed administrative and selling expenses 34000 106000 Net operating income 1325

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