Prepare an income statement for the year using variable costing.

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 $950. Selected data for the company’s operations last year follow: Units in beginning inventory 0 Units produced 250 Units sold 235 Units in ending inventory 15 Variable costs per unit: Direct materials $ 135 Direct labor $ 345 Variable manufacturing overhead $ 30 Variable selling and administrative $ 20 Fixed costs: Fixed manufacturing overhead $ 65,000 Fixed selling and administrative $ 25,000 The absorption costing income statement prepared by the company’s accountant for last year appears below: Sales $ 223,250 Cost of goods sold 180,950 Gross margin 42,300 Selling and administrative expense 29,700 Net operating income $ 12,600 Required: 1. Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period. 2. Prepare an income statement for the year using variable costing.

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