Question

Ida Sidha Karya Company is a family-owned company located on the island of Ball 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 inventos Units produced Units sold Units in ending inventory Variable costs per unit Direct waterials Direct labor Variable manufacturing overhead Variable selling and administrats Fixed costs Fixed manufacturing overhead Fixed selling and administrative The absorption costing Income statement prepared by the company's accountant for last year appears bel company's acco countant for last year goods s010 $ 223,250 180.950 42.300 26.700 15.800 Selling and administrative expense set operating income 18.60 Required: 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?

Answer 1

1
Fixed manufacturing overhead cost included in inventory	10500	=81000/270*35
2
Variable costing Income Statement
Sales		223250
Variable expenses:
Variable cost of goods sold	110450		=235*(110+330+30)
Variable selling and administrative expenses	4700		=235*20
		115150
Contribution margin		108100
Fixed expenses:
Fixed manufacturing overhead	81000
Fixed selling and administrative expenses	22000
		103000
Net operating income		5100
3
Amount of the differnece in net Operating income	10500	=15600-5100