Ida Sidha Karya Company is a family-owned company located in the village of Gian
ID: 2537733 • Letter: I
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 $854. Selected data for the company’s operations last year follow:
Required:
1. Assume that the company uses absorption costing. Compute the unit product cost for one gamelan. (Round your intermediate calculations and final answer to the nearest whole dollar amount.)
2. Assume that the company uses variable costing. Compute the unit product cost for one gamelan.
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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?
2. Prepare an income statement for last year using variable costing.
Units in beginning inventory 0 Units produced 21,000 Units sold 18,000 Units in ending inventory 3,000 Variable costs per unit: Direct materials $ 140 Direct labor $ 470 Variable manufacturing overhead $ 61 Variable selling and administrative $ 21 Fixed costs: Fixed manufacturing overhead $ 700,000 Fixed selling and administrative $ 460,000Explanation / Answer
Answer 1-1. Calculation of Cost per Unit Under Absorption Costing Amount No. of Units Produced 21,000 Direct Material 140.00 Direct Labor 470.00 Variable MOH 61.00 Fixed MOH - $700,000 / 21,000 Units 33.33 Total Cost per Unit 704.33 Note: Selling and administrative expenses (both variable and fixed) are not relevant for the computation of unit product cost in both absorption costing & variable costing. Answer 1-2. Calculation of Cost per Unit Under Variable Costing Amount No. of Units Produced 21,000 Direct Material 140.00 Direct Labor 470.00 Variable MOH 61.00 Total Cost per Unit 671.00 Answer 2-1. Fixed MOH - Per Unit = $65,000 / 250 Units Fixed MOH - Per Unit = $260 Fixed MOH included in Ending Inventory = 20 Units X $260 Fixed MOH included in Ending Inventory = $5,200 Answer 2-2. Calculation of Cost per Unit Under Variable Costing Amount No. of Units Produced 250 Direct Material 145.00 Direct Labor 365.00 Variable MOH 40.00 Total Cost per Unit 550.00 Income Statement Under Variable Costing Sales - 230 Units X $990 227,700.00 Cost of Goods Sold - 230 Units x $550 126,500.00 Manufacturing Margin 101,200.00 Variable - Selling & Admn. Exp. - 230 Units X $25 5,750.00 Contribition Margin 95,450.00 Fixed Expenses: MOH 65,000.00 Selling & Admn. Expense 29,000.00 94,000.00 Net Operating Income 1,450.00
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