EXERCISE 6-1 Variable and Absorption Costing Unit Product Costs [LOS] HM Guided Example 6-1 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 handcrafied Balinese musical instrument called a gemelan thats 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 sole 225 Units in ending inventory . . 25 Variable costs per uni Direct materials . $100 Direct labor . $320 Variable manuiacturing overhead $40 Variable selling and acministrative . $20 Fixed costs: Fixed manufacturing overhead . $60,000 Fixed seling and administratve . $20000 Required: 1. Assume that the company uses absorption costing. Compute the u product cost for one gamelan 2. Assume that the company uses variable costing, Compute the unit product cost for one gamelanEXERCISE 6-2 Variable Costing Income Statement; Explanation of Difference in Net Operating Income [LO6-2] Refer to the data in Exercise 61 for Ida Sidha Karya Company. The absorption costing income statement prepared by the company's ‘accountant for last year appears below: Ses . oe $191,250 ost of goods sold. . 157,500 Gross margin . cc 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 2. Prepare an income statement for the year using variable costing Explain the difference in net operating income between the two costing methods.EXERCISE 6-4 Basic Segmented Income Statement [LOG 4] Wl Guided Example 6.4 Royal Lavcare Company produces and sels two packaged products, Weedban and Greongrow. Revenue and cost information relating to the products follow. Product ‘Weedban. Greengrow Seling price per unit... $0.00 $750 Verlable experses per unit... 0.22.5 $2.49 $5.25 Traceable fhed expenses per year ..... $45,000 $21,000 Common fixed expenses in the company total $33,000 annually. Last year the company produced and sold 15.000 units of Weedban and 28,000 units of Greengrow. Required: Prepare a contribution format income statement segmented by product lines.EXERCISE 6-6 Variable and Absorption Costing Unit Product Costs and Income Statements [LOS-1, LOS 2] Lynch Company manufactures and sells a single product. The following costs were incurred during the company’s first year of operations: Variable costs per unit: Manufacturing: Direct materials ..... $6 Direct labor ........ = $2 Variable menufacturing overhead $3 Varieble selling and administrative $4 Fixed costs peryear: Fixed manufacturing ovethead . ... $300,000 Fixed selling and administrative $180,000 During the year, the company produced 25,000 units and sold 20,000 units. The selling price of the company’s product is $50 per unit Required: 1. Assume that the company uses absorption costing ‘a. Compute the unit product cost. . Prepare an income statement for the year. 2. Assume that the company uses variable costing ‘a. Compute the unit product cost. b. Prepare an income statement for the year. EXERCISE 6-7 Segmented Income Statement [1.06—4] Shannon Company segments its income statement into ts North and South Divisions. The company’s overall sales, contribution margin ratio, and net operating income are $500,000, 46%, and $10,000, respectvely. The North Division's contribution margin and contribution margin ratio are $150,000 ‘and 50%, respectively. The South Division's segment margin 1s $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 andis segmented by divisions. In addition, for the company as a whole and for each segment, show each iter on the sogmented income statements as a percent of sales.