Homework answers / question archive / Bharat Bicycle, located in India, produces an inexpensive yet rugged bicycle for use on crowded city streets

Bharat Bicycle, located in India, produces an inexpensive yet rugged bicycle for use on crowded city streets

Accounting

Share With

---

Bharat Bicycle, located in India, produces an inexpensive yet rugged bicycle for use on crowded city streets. The company sells the bicycle for 710 rupees. (Indian currency is denominated in rupees, denoted by R.) Selected data for the company's operations last year follow:

 

Units in beginning inventory 0  

Units produced 12,050   

Units sold 8,400   

Units in ending inventory 3,650   

Variable costs per unit:        

Direct materialsR199      

Direct labourR209      

Variable manufacturing overheadR55      

Variable selling and administrativeR19   

Fixed costs:       

Fixed manufacturing overheadR759,150      

Fixed selling and administrativeR506,100 

 

An absorption costing income statement prepared by the company's accountant appears below:

 

Sales (8,400 units × R710 per unit)   R5,964,000   

Cost of goods sold:           

Beginning inventoryR0         

Add cost of goods manufactured (12,050 units × R   ?  per unit) 6,338,300             

Goods available for sale 6,338,300         

Less ending inventory (3,650 units × R   ?  per unit) 1,919,900  4,418,400     

Gross margin    1,545,600   

Selling and administrative expenses:           

Variable selling and administrative 159,600         

Fixed selling and administrative 506,100  665,700     

Operating income   R879,900      

 

Required:1.Determine how much of the ending inventory of R1,919,900 above consists of fixed manufacturing overhead cost deferred in inventory to the next period.

  

2.A income statement for the year using the variable costing method.