During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales ( $63 per unit) Cost of goods sold ( $40 per unit) Gross margin Selling and administrative expenses* Net operating income *$3 per unit variable: $249,000 fixed each year. The company's $40 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($475,000 25,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Units produced Units sold Year 1 25,000 20,000 Year 2 25,000 30,000 Year 1 Year 2 $ 1,260,000 $1,890,000 1,200,000 690,000 339,000 $ 351,000 $7 12 2 19 $40 800,000 460,000 309,000 $ 151,000 Required: 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 ( $63 per unit) Cost of goods sold ( $40 per unit) Gross margin Selling and administrative expenses* Net operating income *$3 per unit variable: $249,000 fixed each year. The company's $40 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($475,000 25,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Units produced Units sold Year 1 25,000 20,000 Year 2 25,000 30,000 Year 1 Year 2 $ 1,260,000 $1,890,000 1,200,000 690,000 339,000 $ 351,000 $7 12 2 19 $40 800,000 460,000 309,000 $ 151,000 Required: 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.
Chapter1: Financial Statements And Business Decisions
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The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows:
Sales ( $63 per unit)
Cost of goods sold ($40 per unit)
Gross margin
Selling and administrative expenses*
Net operating income
*$3 per unit variable; $249,000 fixed each year.
The company's $40 unit product cost is computed as follows:
Direct materials.
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead ($475,000 25,000 units)
Absorption costing unit product cost
Production and cost data for the first two years of operations are:
Units produced
Units sold
Year 1
25,000
20,000
Year 2
25,000
30,000
$7
12
Year 1
$ 1,260,000
800,000
460,000
309,000
$ 151,000
2
19
$ 40
Year 2
$ 1,890,000
1,200,000
690,000
339,000
$ 351,000
Required:
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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