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
|
|
0
|
|
Units produced
|
|
240
|
|
Units sold
|
|
225
|
|
Units in ending inventory
|
|
15
|
|
Variable costs per unit:
|
|
|
|
Direct materials
|
$
|
120
|
|
Direct labor
|
$
|
330
|
|
Variable manufacturing overhead
|
$
|
50
|
|
Variable selling and administrative
|
$
|
25
|
|
Fixed costs:
|
|
|
|
Fixed manufacturing overhead
|
$
|
72,000
|
|
Fixed selling and administrative
|
$
|
27,000
|
The absorption costing income statement prepared by the company's accountant for last year appears below:
|
Sales
|
$
|
222,750
|
|
Cost of goods sold
|
|
180,000
|
|
Gross margin
|
|
42,750
|
|
Selling and administrative expense
|
|
32,625
|
|
Net operating income
|
$
|
10,125
|
Required:
- Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period.
- Prepare an income statement for the year using variable costing.