Shastri Bicycle of Bombay, India, produces an inexpensive, - 17497

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Shastri Bicycle of Bombay, India, produces an inexpensive, yet rugged, bicycle for use on the city’s crowded streets that it sells for 500 rupees. (Indian currency is denominated in rupees, denoted by Picture.) Selected data for the company’s operations last year follow:

 

 

 

 

  Units in beginning inventory

 

0  

  Units produced

 

10,000  

  Units sold

 

8,000  

  Units in ending inventory

 

2,000  

  Variable costs per unit:

 

 

       Direct materials

 

Picture120  

       Direct labor

 

Picture140  

       Variable manufacturing overhead

 

Picture50  

       Variable selling and administrative

 

Picture20  

  Fixed costs:

 

 

       Fixed manufacturing overhead

Picture

600,000  

       Fixed selling and administrative

Picture

400,000  


 

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

 

 

 

 

  Sales

Picture

4,000,000  

  Cost of goods sold

 

2,960,000  

 



  Gross margin

 

1,040,000  

  Selling and administrative expense

 

560,000  

 



  Net operating income

Picture

480,000  

 






Required:

 

1.

Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period. (Omit the "Picture" sign in your response.)

2.

Prepare an income statement for the year using variable costing. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "Picture" sign in your response.)

 

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Ch6 Q1.docx
Ch6 Q1.docx