Ida Sidha Karya Company is a family-owned company located in the village of Gianyar on the island of Bali in Indonesia.

Ida Sidha Karya Company is a family-owned company located in the village of Gianyar 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 $840. Selected data for the company’s operations last year follow:

Units in beginning inventory		0
Units produced		300
Units sold		275
Units in ending inventory		25
Variable costs per unit:
Direct materials	$	100
Direct labor	$	310
Variable manufacturing overhead	$	30
Variable selling and administrative	$	35
Fixed costs:
Fixed manufacturing overhead	$	66,000
Fixed selling and administrative	$	31,000

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

Sales	$	231,000
Cost of goods sold		181,500
Gross margin		49,500
Selling and administrative expense		40,625
Net operating income	$	8,875

Required:

1.

Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period.   Explanation: 1. 25 units in ending inventory × $220 per unit fixed manufacturing overhead per unit = $5,500 2. Variable cost of goods sold (275 units sold × $440 per unit) = $121,000 Variable selling and administrative expenses (275 units × $35 per unit) = $9,625