Ida Company produces a handcrafted musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $880. Selected data for the company’s operations last year follow:   Units in beginning inventory 0 Units produced 280 Units sold 240 Units in ending inventory 40 Variable costs per unit:   Direct materials $115 Direct labor $ 335 Variable manufacturing overhead $ 35 Variable selling and administrative $ 25 Fixed costs:   Fixed manufacturing overhead $ 63,000 Fixed selling and administrative $ 23,000   The absorption costing income statement prepared by the company’s accountant for last year appears below:   Sales $ 211,200 Cost of goods sold 170,400 Gross margin 40,800 Selling and administrative expense 29,000 Net operating income $  11,800   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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Ida Company produces a handcrafted musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $880. Selected data for the company’s operations last year follow:

 

Units in beginning inventory 0
Units produced 280
Units sold 240
Units in ending inventory 40
Variable costs per unit:  
Direct materials $115
Direct labor $ 335
Variable manufacturing overhead $ 35
Variable selling and administrative $ 25
Fixed costs:  
Fixed manufacturing overhead $ 63,000
Fixed selling and administrative $ 23,000

 

The absorption costing income statement prepared by the company’s accountant for last year appears below:

 

Sales $ 211,200
Cost of goods sold 170,400
Gross margin 40,800
Selling and administrative expense 29,000
Net operating income $  11,800

 

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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