Wednesday, 1 April 2015

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.
 save image
Explanation: