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 $870. 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 260 Units sold 230 Units in ending inventory 30 Variable costs per unit: Direct materials $ 105 Direct labor $ 325 Variable manufacturing overhead $ 45 Variable selling and administrative $ 15 Fixed costs: Fixed manufacturing overhead $ 65,000 Fixed selling and administrative $ 21,000

Explanation / Answer

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

Fixed manufacturing overhead cost included in ending inventory = (65000/260*30) = 7500

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

Sales 200100 Variable cost Variable cost of goods sold (230*475) (109250) Variable selling and administrative expense (230*15) (3450) (112700) Contribution margin 87400 Fixed cost Fixed manufacturing overhead (65000) Fixed selling and administrative expense (21000) (86000) Net operating income 1400

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.