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 (@ $36 per unit) Gross margin Selling and administrative expenses* Net operating income. * $3 per unit variable; $255,000 fixed each year. The company's $36 unit product cost is computed as follows: Direct materials. Direct labor Year 1 $ 1,008,000 576,000 432,000 303,000 $ 129,000 Variable manufacturing overhead Fixed manufacturing overhead ($273,000 ÷ 21,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Units produced Units sold Year 1 21,000 16,000 Year 2 21,000 26,000 Year 2 $ 1,638,000 936,000 702,000 333,000 $ 369,000 $9 12 2 13 $36 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 (@ $36 per unit) Gross margin Selling and administrative expenses* Net operating income. * $3 per unit variable; $255,000 fixed each year. The company's $36 unit product cost is computed as follows: Direct materials. Direct labor Year 1 $ 1,008,000 576,000 432,000 303,000 $ 129,000 Variable manufacturing overhead Fixed manufacturing overhead ($273,000 ÷ 21,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Units produced Units sold Year 1 21,000 16,000 Year 2 21,000 26,000 Year 2 $ 1,638,000 936,000 702,000 333,000 $ 369,000 $9 12 2 13 $36 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.

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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