Ida Sidha Karya Company is a family-owned company located in thevillage of Gianyar on the island of Bali in Indonesia. The companyproduces a handcrafted Balinese musical instrument called a gamelanthat is similar to a xylophone. The gamelans are sold for $900.Selected data for the company’s operations last year follow:
Units in beginning inventory 0
Units produced 300
Units sold 275
Units in ending inventory 25
Variable costs per unit:
Direct materials $ 125
Direct labor $ 345
Variable manufacturing overhead $ 45
Variable selling and administrative $ 35
Fixed costs:
Fixed manufacturing overhead $ 63,000
Fixed selling and administrative $ 25,000
The absorption costing income statement prepared by the company’saccountant for last year appears below:
Sales $ 247,500
Cost of goods sold 199,375
Gross margin 48,125
Selling and administrative expense 34,625
Net operating income $ 13,500
Required:
1. Under absorption costing, how much fixed manufacturing overheadcost is included in the company's inventory at the end of lastyear?
2. Prepare an income statement for last year using variablecosting.
