Exercise 6-2 Variable Costing Income Statement; Explanation of Difference in Net
ID: 2508199 • Letter: E
Question
Exercise 6-2 Variable Costing Income Statement; Explanation of Difference in Net Operating Income [LO6-2]
Ida Sidha Karya Company is a family-owned company located in the village of Glanyar 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 $860. Selected data for the company’s operations last year follow:
27,000
The absorption costing income statement prepared by the company’s accountant for last year appears below:
Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period.
Ida Sidha Karya Company is a family-owned company located in the village of Glanyar 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 $860. Selected data for the company’s operations last year follow:
Explanation / Answer
Solution:(1): Calculation of ending inventory consisting of fixed manufacturing overhead:
Solution:(2): Income statement under Variable costing:
Particulars Details Total fixed manufacturing overhead $64,000 Manufacturing overhead per unit(Fixed Manufacturing overhead ÷ units produced) $200 Ending inventory 35 units Fixed Manufacturing overhead for 35 units (200*35) $7,000