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 $950. Selected data for the company’s operations last year follow: Units in beginning inventory 0 Units produced 230 Units sold 200 Units in ending inventory 30 Variable costs per unit: Direct materials 110$ Direct labor 320$ Variable manufacturing overhead 30$ Variable selling and administrative 10$ Fixed costs: Fixed manufacturing overhead 69000$ Fixed selling and administrative 27000$ The absorption costing income statement prepared by the company’s accountant for last year appears below: Sales 192000$ Costs of good sold 152000 Gross margin 40000 Selling and administrative expense 29000 Net operating income 11000$ 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?
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 $950. Selected data for the company’s operations last year follow: Units in beginning inventory 0 Units produced 230 Units sold 200 Units in ending inventory 30 Variable costs per unit: Direct materials 110$ Direct labor 320$ Variable manufacturing overhead 30$ Variable selling and administrative 10$ Fixed costs: Fixed manufacturing overhead 69000$ Fixed selling and administrative 27000$ The absorption costing income statement prepared by the company’s accountant for last year appears below: Sales 192000$ Costs of good sold 152000 Gross margin 40000 Selling and administrative expense 29000 Net operating income 11000$ 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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 $950. Selected data for the
company’s operations last year follow:
| Units in beginning inventory | 0 |
| Units produced | 230 |
| Units sold | 200 |
| Units in ending inventory | 30 |
| Variable costs per unit: | |
| Direct materials | 110$ |
| Direct labor | 320$ |
| Variable manufacturing |
30$ |
| Variable selling and administrative | 10$ |
| Fixed costs: | |
| Fixed manufacturing overhead | 69000$ |
| Fixed selling and administrative | 27000$ |
The absorption costing income statement prepared by the company’s
accountant for last year appears below:
| Sales | 192000$ |
| Costs of good sold | 152000 |
| Gross margin | 40000 |
| Selling and administrative expense | 29000 |
| Net operating income | 11000$ |
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?
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