An electronics firm is currently manufacturing an item that has a variable cost of $ 0.45 per unit and a selling price of $ 7.45 per unit. fixed costs are $ 15 comma 000. current volume is 30 comma 000 units. the firm can substantially improve the product quality by adding a new piece of equipment at an additional fixed cost of $ 5 comma 600. variable cost would increase to $ 0.60 and the selling price would be revised to $ 7.55 with the expectation that the volume would be 50 comma 000 units as a result of a higher-quality product.

Exercise 6-2 variable costing income statement; explanation of difference in net operating income [lo6-2] ida sidha karya company is a family-owned company located 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 gamelans are sold for $970. selected data for the company’s operations last year follow: units in beginning inventory 0 units produced 200 units sold 180 units in ending inventory 20 variable costs per unit: direct materials $ 130 direct labor $ 300 variable manufacturing overhead $ 30 variable selling and administrative $ 15 fixed costs: fixed manufacturing overhead $ 63,000 fixed selling and administrative $ 25,000 the absorption costing income statement prepared by the company’s accountant for last year appears below: sales $ 174,600 cost of goods sold 139,500 gross margin 35,100 selling and administrative expense 27,700 net operating income $ 7,400 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.