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:

26,000  

The absorption costing income statement prepared by the company’s accountant for last year appears below:

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

       

       

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:

Explanation / Answer

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

Fixed manufacturing overhead consist of fixed manufacturing overhead = (62000/210)*30 = 6000

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

Sales 254800 Less; Variable cost of goods sold (280*530) (148400) Less: Variable selling and administrative expense (280*40) (11200) Total variable cost (159600) Contribution margin 95200 Less: Fixed manufacturing overhead (62000) Less: Fixed selling and administrative expense (26000) Total fixed cost (88000) Net operating income 7200

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