Exercise 6-2 (Algo) Variable Costing Income Statement; Explanation of Difference in Net Operating Income [LO6-2]...
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Exercise 6-2 (Algo) Variable Costing Income Statement; Explanation of Difference in Net Operating Income [LO6-2]
Ida Company produces a handcrafted musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $980. Selected data for the companys operations last year follow:
Units in beginning inventory
0
Units produced
240
Units sold
225
Units in ending inventory
15
Variable costs per unit:
Direct materials
$
140
Direct labor
$
360
Variable manufacturing overhead
$
35
Variable selling and administrative
$
20
Fixed costs:
Fixed manufacturing overhead
$
66,000
Fixed selling and administrative
$
28,000
The absorption costing income statement prepared by the companys accountant for last year appears below:
Sales
$
220,500
Cost of goods sold
182,250
Gross margin
38,250
Selling and administrative expense
32,500
Net operating income
$
5,750
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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