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: Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per uni 250 230 20 t: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative $145 $365 40 25 Fixed costs: Fixed manufacturing overhead Fixed selling and administrative 65,000 29,000 The absorption costing income statement prepared by the company's accountant for last year appears below: S 227,700 186,300 41,400 34,750 $6,650 Sales Cost of goods sold Gross margin Selling and administrative expense Net operating income

Explanation / Answer

1) Fixed manufacturing overhead cost included in ending inventory = (65000/250*20) = 5200

2) Variable costing income statement :

Sales 227700 Less:Variable cost of goods sold (230*550) (126500) Less: Variable selling and administrative exp (230*25) (5750) Total variable cost (132250) Contribution margin 95450 Less: Fixed manufacturing cost (65000) Less: Fixed selling and administrative exp (29000) Total fixed expense (94000) Net operating income 1450

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