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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 ( $32 per unit) Gross margin Selling and administrative expenses* Net operating income *$3 per unit variable; $255,000 fixed each year. The company's $32 unit producircost is computed as follows: Direct materials Direct labor Year 1 Year 2 $ 1,008,000 $1,638,000 512,000 496,000 303,000 $ 193,000 Variable manufacturing overhead Fixed manufacturing overhead ($294,000+ 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 26,000 832,000 806,000 333,000 $ 473,000 $7 10 1 14 $ 32 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 ( $32 per unit) Gross margin Selling and administrative expenses* Net operating income *$3 per unit variable; $255,000 fixed each year. The company's $32 unit producircost is computed as follows: Direct materials Direct labor Year 1 Year 2 $ 1,008,000 $1,638,000 512,000 496,000 303,000 $ 193,000 Variable manufacturing overhead Fixed manufacturing overhead ($294,000+ 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 26,000 832,000 806,000 333,000 $ 473,000 $7 10 1 14 $ 32 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
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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 ($32 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 Year 2 $ 1,008,000 $1,638,000. 512,000 496,000 303,000 $ 193,000 *$3 per unit variable; $255,000 fixed each year. The company's $32 unit producircost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($294,000+ 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 11 Year 2 21,000 16,000 21,000 26,000 832,000 806,000 333,000 $ 473,000 $7 10 1 14 $ 32 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.
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 ($32 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 Year 2 $ 1,008,000 $1,638,000. 512,000 496,000 303,000 $ 193,000 *$3 per unit variable; $255,000 fixed each year. The company's $32 unit producircost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($294,000+ 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 11 Year 2 21,000 16,000 21,000 26,000 832,000 806,000 333,000 $ 473,000 $7 10 1 14 $ 32 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.
Required 1 Required 2 What is the variable costing net operating income in Year 1 and in Year 2? (Loss amounts should be indicated with a minus sign.) Net operating income (loss) Required 1 Required 3 Required 2 Year 1 Year 2 < Required 1 Show Transcribed Text Required 3 Required 3 > Reconcile the absorption costing and the variable costing net operating income figures for each year. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Year 1 Variable costing net operating income (loss) Add (deduct) fixed manufacturing overhead deferred in (released from) inventory under absorption costing Absorption costing net operating income Year 2
Transcribed Image Text:Required 1 Required 2 What is the variable costing net operating income in Year 1 and in Year 2? (Loss amounts should be indicated with a minus sign.) Net operating income (loss) Required 1 Required 3 Required 2 Year 1 Year 2 < Required 1 Show Transcribed Text Required 3 Required 3 > Reconcile the absorption costing and the variable costing net operating income figures for each year. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Year 1 Variable costing net operating income (loss) Add (deduct) fixed manufacturing overhead deferred in (released from) inventory under absorption costing Absorption costing net operating income Year 2
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