da Company produces a handcrafted musical instrument called a gamelan that is similar to a...
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Accounting
da Company produces a handcrafted musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $860. Selected data for the companys operations last year follow:
Units in beginning inventory
0
Units produced
320
Units sold
285
Units in ending inventory
35
Variable costs per unit:
Direct materials
$135
Direct labor
$ 355
Variable manufacturing overhead
$ 30
Variable selling and administrative
$ 15
Fixed costs:
Fixed manufacturing overhead
$ 64,000
Fixed selling and administrative
$ 27,000
The absorption costing income statement prepared by the companys accountant for last year appears below:
Sales
$ 245,100
Cost of goods sold
205,200
Gross margin
39,900
Selling and administrative expense
31,275
Net operating income
$ 8,625
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.
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