Refer to the data in E6-1 for Ida Sidha Karya Company. A statement of operating profit or loss prepared under the absorption costing method by the company’s accountant appears below (all currency values are in thousands of rupiahs):

Required
1. Determine how much of the ending inventory of Rp17,500 above consists of fixed manufacturing overhead cost deferred in inventory to the next period.
2. Prepare a statement of profit or loss for the year using the variable costing method.
3. Explain the difference in profit between the two costing methods.

Data from E6-1

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 sounding bars are cast from brass and hand-filed to attain just the right sound. The bars are then mounted on an intricately hand-carved wooden base. The gamelans are sold for 850 (thousand) rupiahs. (The currency in Indonesia is the rupiah, which is denoted by Rp.) Selected data for the company’s operations last year follow (all currency values are in thousands of rupiahs):

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Revenue (225 units x Rp850) Less cost of goods sold: Beginning inventory Add cost of goods manufactured (250 units x Rp ?) Goods available for sale Less ending inventory (25 units x Rp ?) Gross margin Less selling and administrative expenses: Variable selling and administrative Fixed selling and administrative Operating profit RpO 175,000 175,000 17,500 4,500 20,000 Rp191,250 157,500 33,750 24,500 Rp9,250