Help Save &Exit; i Check my worl Ida Sidha Karya Company is a family-owned compa

Question

Help Save &Exit; i Check my worl 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 $990. Selected data for the company's operations last year follow Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: 200 180 20 Direct materiala Direct labor Variable manufacturing overhead Variable selling and administrative $ 120 $340 40 30 Fixed costsi Fixed manufacturing overhead Fixed selling and administrative s 56,000 s 24,000o The absorption costing income statement prepared by the company's accountant for last year appears below Sales Cost of goods sold Gross margin Selling and Net operating income s 178,200 140,400 37,800 29,400 ,400 1. Under absorption costing, how much fixed manufacturing overheead cost is included in the company's inventory at the end of last year?

Explanation / Answer

a) Fixed manufacturing overhead cost included in inventory = 56000/200*20 = 5600

b) Variable costing income statement :

Sales 178200 Less: Variable expense Direct material (180*120) (21600) Direct labour (180*340) (61200) Variable manufacturing overhead (180*40) (7200) Variable selling and administrative expense (180*30) (5400) Total variable expense (95400) Contribution margin 82800 Less; FIxed expense Fixed manufacturing overhead (56000) Fixed selling and administrative expense (24000) Total fixed expense (80000) Net operating income 2800

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