Ida Sidha Karya Company is a family-owned company located 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 $860. Selected data for the company’s operations last year follow: Units in beginning inventory 0 Units produced 320 Units sold 285 Units in ending inventory 35 Variable costs per unit: Direct materials $ 135 Direct labor $ 355 Variable manufacturing overhead $ 30 Variable selling and administrative $ 15 Fixed costs: Fixed manufacturing overhead $ 64,000 Fixed selling and administrative $ 27,000 The absorption costing income statement prepared by the company’s accountant for last year appears below: Sales $ 245,100 Cost of goods sold 205,200 Gross margin 39,900 Selling and administrative expense 31,275 Net operating income $ 8,625 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. What is the amount of the difference in net operating income between the two costing methods? Prepare an income statement for last year using variable costing. Ida Sidha Karya Company Variable Costing Income Statement Salesselected answer correct $245,100selected answer correct Variable expenses:selected answer correct Variable selling and administrative expensesselected answer correct $4,275selected answer correct Variable cost of goods soldselected answer correct (38,475)selected answer incorrect not attempted not attempted not attempted not attempted (34,200) Contribution marginselected answer correct 210,900 Fixed expenses:selected answer correct Fixed manufacturing overheadselected answer correct (64,000)selected answer correct Fixed selling and administrative expensesselected answer correct 27,000selected answer correct not attempted not attempted not attempted not attempted (37,000) not attempted $173,900

Ida Sidha Karya Company is a family-owned company located 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 $860. Selected data for the company’s operations last year follow: Units in beginning inventory 0 Units produced 320 Units sold 285 Units in ending inventory 35 Variable costs per unit: Direct materials $ 135 Direct labor $ 355 Variable manufacturing overhead $ 30 Variable selling and administrative $ 15 Fixed costs: Fixed manufacturing overhead $ 64,000 Fixed selling and administrative $ 27,000 The absorption costing income statement prepared by the company’s accountant for last year appears below: Sales $ 245,100 Cost of goods sold 205,200 Gross margin 39,900 Selling and administrative expense 31,275 Net operating income $ 8,625 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. What is the amount of the difference in net operating income between the two costing methods? Prepare an income statement for last year using variable costing. Ida Sidha Karya Company Variable Costing Income Statement Salesselected answer correct $245,100selected answer correct Variable expenses:selected answer correct Variable selling and administrative expensesselected answer correct $4,275selected answer correct Variable cost of goods soldselected answer correct (38,475)selected answer incorrect not attempted not attempted not attempted not attempted (34,200) Contribution marginselected answer correct 210,900 Fixed expenses:selected answer correct Fixed manufacturing overheadselected answer correct (64,000)selected answer correct Fixed selling and administrative expensesselected answer correct 27,000selected answer correct not attempted not attempted not attempted not attempted (37,000) not attempted $173,900

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Units in beginning inventory		0
Units produced		320
Units sold		285
Units in ending inventory		35
Variable costs per unit:
Direct materials	$	135
Direct labor	$	355
Variable manufacturing overhead	$	30
Variable selling and administrative	$	15
Fixed costs:
Fixed manufacturing overhead	$	64,000
Fixed selling and administrative	$	27,000

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


Sales	$	245,100
Cost of goods sold		205,200
Gross margin		39,900
Selling and administrative expense		31,275
Net operating income	$	8,625

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. What is the amount of the difference in net operating income between the two costing methods?

Prepare an income statement for last year using variable costing.

Ida Sidha Karya Company
Variable Costing Income Statement
Salesselected answer correct		$245,100selected answer correct
Variable expenses:selected answer correct
Variable selling and administrative expensesselected answer correct	$4,275selected answer correct
Variable cost of goods soldselected answer correct	(38,475)selected answer incorrect
not attempted	not attempted
not attempted	not attempted	(34,200)
Contribution marginselected answer correct		210,900
Fixed expenses:selected answer correct
Fixed manufacturing overheadselected answer correct	(64,000)selected answer correct
Fixed selling and administrative expensesselected answer correct	27,000selected answer correct
not attempted	not attempted
not attempted	not attempted	(37,000)
not attempted		$173,900

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