Shastri Bicycle of Bombay, India, produces an inexpensive, yet rugged,

Shastri Bicycle of Bombay, India, produces an inexpensive, yet rugged, bicycle for use on the city’s crowded streets that it sells for 500 rupees. (Indian currency is denominated in rupees, denoted by .) Selected data for the company’s operations last year follow:

Units in beginning inventory		0
Units produced		10,000
Units sold		8,000
Units in ending inventory		2,000
Variable costs per unit:
Direct materials		120
Direct labor		140
Variable manufacturing overhead		50
Variable selling and administrative		20
Fixed costs:
Fixed manufacturing overhead		600,000
Fixed selling and administrative		400,000

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

Sales		4,000,000
Cost of goods sold		2,960,000
Gross margin		1,040,000
Selling and administrative expense		560,000
Net operating income		480,000

Required:

1.	Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period. (Omit the "" sign in your response.)

Total fixed manufacturing overhead in ending inventory

120,000

2.	Prepare an income statement for the year using variable costing. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "" sign in your response.)

Variable Costing Income Statement
Sales		4,000,000
Variable expenses:
Variable cost of goods sold
Variable selling and administrative expenses		2,640,000
Contribution margin		1,360,000
Fixed expenses:
Fixed manufacturing overhead
Fixed selling and administrative expenses		1,000,000
Net operating income (loss)		360,000