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 (@ $35 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $1,008, 000 560, 000 448, 000 295, 000 153, e00 Year 2 $1,638, 000 910, 000 728, 000 325, 000 $ 403, 000 $3 per unit variable; $247,000 fixed each year. The company's $35 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($357, 000 + 21, 000 units) Absorption costing unit productlcost 10 $ 35 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced Units sold 21, 000 16, 000 21, 000 26, 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 fiqures for each year. 5O37

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 (@ $35 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $1,008, 000 560, 000 448, 000 295, 000 153, e00 Year 2 $1,638, 000 910, 000 728, 000 325, 000 $ 403, 000 $3 per unit variable; $247,000 fixed each year. The company's $35 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($357, 000 + 21, 000 units) Absorption costing unit productlcost 10 $ 35 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced Units sold 21, 000 16, 000 21, 000 26, 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 fiqures for each year. 5O37

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

davuben
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Year 1 Sales (862 per unit) Year 2 $930,000 $1,550,000 495,000 Cost of goods sold t# $33 per unit) Gross margin 625,000 435,000 725,000 Selling and adninistrative expenses 292.000 322,000 Set operating income $ 143,000 $ 403,000 *$3 per unit variable: $247,000 fixed each year. The company's $33 unit product cost is computed as follows: Dirpet materials Diret labor Variable manufacturing overhead 3 13 Fixed manufacturing overhead (5260,000 20,000 unita) Absorption costing unit product cost Production and cost data for the first two years of operations are Year 1 Year 2 Units produced 20,000 20,000 thits sold 15,000 25,000 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 27 3. Reconcile the absorption costing and the variable costing net operating income figures…
ed Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow. Income Statements (Absorption Costing) Sales ($60 per unit) Year 1 $ Year 2 $ 1,920,000 3,960,000 Cost of goods sold ($45 per unit) 1,440,000 2,970,000 Gross profit 480,000 990,000 Selling and administrative expenses ok Income t 338,000 474,000 $ 142,000 $ 516,000 Additional Information a. Sales and production data for these first two years follow. Year 1 Year 2 nces Units Units produced 49,000 49,000 Units sold 32,000 66,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $45 per unit product cost using absorption costing consists of the following. Direct materials Direct labor $ 12 19 Variable overhead Fixed overhead ($539,000/49,000 units) 3 11 Total product cost per unit $ 45 c. Selling and administrative expenses consist of the following. Selling and Administrative Expenses Variable selling and…
s
The contribution format income statement for Huerra Company for last year is given below. Total $1,006,000 603,600 Unit $ 50.30 30.18 402,400 20.12 322,400 16.12 Sales Variable expenses Contribution margin Fixed expenses Net operating income Income taxes @ 40% Net income 80,000 32,000 $ 48,000 4.00 1.60 $2.40 The company had average operating assets of $502,000 during the year. Required: 1. Compute the company's margin, turnover, and return on investment (ROI) for the period. For each of the following questions, indicate whether the margin and turnover will increase, decrease, or remain unchanged as a result of the events described, and then compute the new ROI figure. Consider each question separately, starting in each case from the data used to compute the original ROI in (1) above. 2. Using Lean Production, the company is able to reduce the average level of inventory by $93,000. 3. The company achieves a cost savings of $7,000 per year by using less costly materials. 4. The company…
Whitman Company Income Statement Sales (38,000 units $41.60 per unit) Cost of goods sold (38,000 units x $23 per unit) Gross margin Selling and administrative expenses $ 1,580,800 874,000 706,800 475,000 Net operating income $ 231,800 The company's selling and administrative expenses consist of $285,000 per year in fixed expenses and $5 per unit sold in variab expenses. The $23 unit product cost given above is computed as follows: Direct materials Direct labor Variable manufacturing overhead $ 11 4 4 Fixed manufacturing overhead ($216,000 + 54,000 units) Absorption costing unit product cost 4 $ 23 Required: 1. Redo the company's Income statement in the contribution format using variable costing. 2. Reconcile any difference between the net operating Income on your variable costing Income statement and the net operating Income on the absorption costing Income statement above. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Redo the company's…
Darby Company, operating at full capacity, sold 124,200 units at a price of $84 per unit during the current year. Its income statement is as follows: Sales $10,432,800 Cost of goods sold 3,696,000 Gross profit $6,736,800 Expenses: Selling expenses $1,848,000 Administrative expenses 1,120,000 Total expenses 2,968,000 Income from operations $3,768,800 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative expenses 30% 70% Management is considering a plant expansion program for the following year that will permit an increase of $924,000 in yearly sales. The expansion will increase fixed costs by $123,200, but will not affect the relationship between sales and variable costs. 1. Determine the total variable costs and the total fixed costs for the current year. Total variable costs $fill in the blank 1 Total fixed…
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $62 per unit) $ 1,178,000 $ 1,798,000 Cost of goods sold (@ $42 per unit) 798,000 1,218,000 Gross margin 380,000 580,000 Selling and administrative expenses* 306,000 336,000 Net operating income $ 74,000 $ 244,000 * $3 per unit variable; $249,000 fixed each year. The company’s $42 unit product cost is computed as follows: Direct materials $ 8 Direct labor 11 Variable manufacturing overhead 5 Fixed manufacturing overhead ($432,000 -: 24,000 units) 18 Absorption costing unit product cost $ 42 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced 24,000 24,000 Units sold 19,000 29,000 Required: Using variable costing, what is the unit product cost for both years? What is the variable costing net operating income in Year 1 and in Year 2? Reconcile the absorption costing and the variable costing net operating…
2. A condensed income statement by product line for Master Energy Co. indicated the following for the Master Energy product line for the past year: Revenues and Costs Dollar Amount Sales $12,500,000 Cost of goods sold Gross profit Operating expenses Loss from operations 8,250,000 4,250,000 6,010,000 (1,760,000) It is estimated that 25% of the cost of goods sold represents fixed factory overhead costs and that 15% of the operating expenses are fixed. Because Master Energy is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis dated January 31st to determine whether Master Energy should be continued (Alternative 1) or discontinued (Alternative 2). b. Should Master Energy be retained? Explain.
The following data are available for the Valentine Corporation for a recent month: Product A Product B Product C Total Selling price $23 $69 $115 Sales $115,000 $172,500 $287,500 |Variable |$91,000 $104,000 $27,000 Expenses Contribution $24,000 $68,500 $260,500 Margin Fixed $55,000 Expenses Net Operating Income What is the sales revenue required from Product C at the break even point?
Assume a retailing company has two departments-Department A and Department B. The company's most recent contribution format income statement follows: Total Department A Department B Sales $ 800,000 $ 350,000 $ 450,000 Variable expenses 320,000 120,000 200,000 Contribution margin 480,000 230,000 250,000 Fixed expenses 400,000 140,000 260,000 Net operating income (loss) $ 80,000 $ 90,000 $ (10,000) The company says that $120,000 of the fixed expenses being charged to Department B are sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department B is discontinued the sales in Department A will drop by 12%. What is the financial advantage (disadvantage) of discontinuing Department B?
Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow. Income Statements (Absorption Costing) Sales ($52 per unit) Cost of goods sold ($36 per unit) Year 2 Year 1 $ 1,508,000 1,044,000 $ 2,756,000 1,908,000 Gross profit Selling and administrative expenses Income Additional Information a. Sales and production data for these first two years follow. Units Units produced Units sold Year 1 41,000 29,000 Year 2 41,000 53,000 464,000 366,000 848,000 462,000 $ 98,000 $ 386,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $36 per unit product cost using absorption costing consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($451,000/41,000 units) Total product cost per unit $ 11 11 3 11 $ 36 c. Selling and administrative expenses consist of the following. Selling and Administrative Expenses Variable selling and administrative…