During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Year 1 $ 1,054,000 595,000 459,000 305,000 $ 154,000 Sales (@ $62 per unit) Cost of goods sold (e $35 per unit) Gross margin Selling and administrative expenses* Net operating income *$3 per unit variable: $254,000 fixed each year. The company's $35 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($396,000+ 22,000 units) Absorption costing unit product cost Year 2 $1,674,000 Production and cost data for the first two years of operations are: Year 1 Year 2 22,000 22,000 17,000 27,000 Units produced Units sold 945,000 729,000 335,000 $ 394,000 $5 8 4 18 $ 35 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: Year 1 $ 1,054,000 595,000 459,000 305,000 $ 154,000 Sales (@ $62 per unit) Cost of goods sold (e $35 per unit) Gross margin Selling and administrative expenses* Net operating income *$3 per unit variable: $254,000 fixed each year. The company's $35 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($396,000+ 22,000 units) Absorption costing unit product cost Year 2 $1,674,000 Production and cost data for the first two years of operations are: Year 1 Year 2 22,000 22,000 17,000 27,000 Units produced Units sold 945,000 729,000 335,000 $ 394,000 $5 8 4 18 $ 35 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
Section: Chapter Questions
Problem 1Q
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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 (@ $62 per unit)
Cost of goods sold (@ $35 per unit)
Gross margin
Selling and administrative expenses
Net operating income
Year 1
Year 2
$ 1,054,000 $1,674,000
595,000
459,000
305,000
$ 154,000
*$3 per unit variable; $254,000 fixed each year.
The company's $35 unit product cost is computed as follows:
Direct materials.
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead ($396,000+ 22,000 units)
Absorption costing unit product cost
Production and cost data for the first two years of operations are:
Year 1
Year 2
22,000
22,000
17,000.
27,000
Units produced
Units sold
945,000
729,000
335,000
$ 394,000
8
4
18
$ 35
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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