Exercise 4-2 (Algo) Variable Costing Income Statement; Explanation of Difference in Net Operating Income [LO4-2]

Ida Company produces a handcrafted musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $980. Selected data for the companys operations last year follow:

Units in beginning inventory	0
Units produced	240
Units sold	225
Units in ending inventory	15
Variable costs per unit:
Direct materials	$ 140
Direct labor	$ 360
Variable manufacturing overhead	$ 35
Variable selling and administrative	$ 20
Fixed costs:
Fixed manufacturing overhead	$ 66,000
Fixed selling and administrative	$ 28,000

The absorption costing income statement prepared by the companys accountant for last year appears below:

Sales	$ 220,500
Cost of goods sold	182,250
Gross margin	38,250
Selling and administrative expense	32,500
Net operating income	$ 5,750

Required:

1. Under absorption costing, how much fixed manufacturing overhead cost is included in the company's inventory at the end of last year?
2. Prepare an income statement for last year using variable costing.