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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.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
Transcribed Image Text: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.
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