During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $64 per unit) Cost of goods sold (@ $37 per unit) Gross margin Selling and administrative expenses* Net operating income * $3 per unit variable; $251,000 fixed each year. The company's $37 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($280,000 + 20,000 units) Absorption costing unit product cost $ 9 13 1 14 $ 37 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced Units sold Required: 20,000 20,000 15,000 25,000 Year 1 $ 960,000 Year 2 $ 1,600,000 555,000 405,000 925,000 675,000 296,000 326,000 $ 109,000 $ 349,000 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable costing net operating income figures for each year.

During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $64 per unit) Cost of goods sold (@ $37 per unit) Gross margin Selling and administrative expenses* Net operating income * $3 per unit variable; $251,000 fixed each year. The company's $37 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($280,000 + 20,000 units) Absorption costing unit product cost $ 9 13 1 14 $ 37 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced Units sold Required: 20,000 20,000 15,000 25,000 Year 1 $ 960,000 Year 2 $ 1,600,000 555,000 405,000 925,000 675,000 296,000 326,000 $ 109,000 $ 349,000 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable costing net operating income figures for each year.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 22E: Ellerson Company provided the following information for the last calendar year: During the year,...

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Ellerson Company provided the following information for the last calendar year: During the year, direct materials purchases amounted to 278,000, direct labor cost was 189,000, and overhead cost was 523,000. During the year, 100,000 units were completed. Required: 1. Calculate the total cost of direct materials used in production. 2. Calculate the cost of goods manufactured. Calculate the unit manufacturing cost. 3. Of the unit manufacturing cost calculated in Requirement 2, 2.70 is direct materials and 5.30 is overhead. What is the prime cost per unit? Conversion cost per unit?
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