Ch 6 Homework - Ch 6 Homework Exercise 1 Ida Sidha Karya Company is a family-owned company located in the village of Gianyar on the island of Bali in

# Ch 6 Homework - Ch 6 Homework Exercise 1 Ida Sidha Karya...

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Ch 6 Homework Exercise 1 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 \$850. Selected data for the company’s operations last year follow: Units in beginning inventory 0 Units produced 250 Units sold 225 Units in ending inventory 25 Variable costs per unit: Direct materials \$ 100 Direct labor \$ 320 Variable manufacturing overhead \$ 40 Variable selling and administrative \$ 20 Fixed costs: Fixed manufacturing overhead \$ 60,000 Fixed selling and administrative \$ 20,000 The absorption costing income statement prepared by the company’s accountant for last year appears below: Sales \$ 191,250 Cost of goods sold 157,500 Gross margin 33,750 Selling and administrative expense 24,500 Net operating income \$ 9,250 Required: 1 . Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period. Total fixed manufacturing overhead in ending inventory \$6,000
2 . Prepare an income statement for the year using variable costing. Ida Sidha Karya Company Variable Costing Income Statement Sales \$191,250 Variable expenses: Variable cost of goods sold \$103,500 Variable selling and administrative expense 4,500 108,000 Contribution margin 83,250 Fixed expenses: Fixed manufacturing overhead 60,000 Fixed selling and administrative expense 20,000 80,000 Net operating income \$3,250 Explanation: 1. 25 units in ending inventory × \$240 per unit fixed manufacturing overhead per unit = \$6,000 2. Variable cost of goods sold (225 units sold × \$460 per unit) = \$103,500 Variable selling and administrative expenses (225 units × \$20 per unit) = 4,500 Exercise 2 Shannon Company segments its income statement into its North and South Divisions. The company’s overall sales, contribution margin ratio, and net operating income are \$500,000, 46%, and \$10,000, respectively. The North Division’s contribution margin and contribution margin ratio are \$150,000 and 50%, respectively. The South Division’s segment margin is \$30,000. The company has \$90,000 of common fixed expenses that cannot be traced to either division. Required: Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions. (Round your percentage answers to 1 decimal place (i.e .1234 should be entered as 12.3)) Divisions Total Company North South
Amount % Amount % Amount % Sales \$500,000 100.0 \$300,000 100.0 \$200,000 100.0 Variable expenses 270,000 54.0 150,000 50.0 120,000 60.0 Contribution margin 230,000 46.0 150,000 50.0 80,000 40.0 Traceable fixed expenses 130,000 26.0 80,000 26.7 50,000 25.0 Territorial segment margin 100,000 20.0 \$70,000 23.3 \$30,000 15.0 Common fixed expenses 90,000 18.0 Net operating income \$10,000 2.0
Exercise 3 Whitman Company has just completed its first year of operations. The company’s absorption costing income statement for the year appears below: Whitman Company Income Statement Sales (35,000 units × \$25 per unit) \$ 875,000 Cost of goods sold (35,000 units × \$16 per unit) 560,000 Gross margin 315,000 Selling and administrative expenses 280,000 Net operating income \$ 35,000

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