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 $950. Selected data for the company’s operations last year follow:

22,000  

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 $950. 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 cost per unit = 81000/270 = 300 per unit

Ending inventory = 35 unit

Fixed manufacturing overhead cost deferred in inventory = 300*35 = 10500

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

Sales 223250 Less: Variable cost of goods sold (470*235) (110450) Gross contribution margin 112800 Less: Variable selling and administrative exp (235*20) (4700) Net contribution margin 108100 Less: Fixed expenses Manufacturing cost (81000) Selling and administrative expenses (22000) (103000) Net operating income 5100

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