During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows:Year 2$ 1,827,0001,073,000754,000333,000$ 421,000Year 1Sales (@ $63 per unit)Cost of goods sold (@ $37 per unit)Gross marginSelling and administrative expenses*Net operating income$1,197,000703,000494,000303,000$ 191,000* $3 per unit variable; $246,000 fixed each year.The company's $37 unit product cost is computed as follows:Direct materialsDirect laborVariable manufacturing overheadFixed manufacturing overhead ($456,000 - 24,000 units)Absorption costing unit product cost98119$ 37Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consistsof depreciation charges on production equipment and buildings.Production and cost data for the two years are:Units producedUnits soldYear 124,00019,000Year 224,00029,000Required:1. Prepare a variable costing contribution format income statement for each year.Heaton CompanyVariable Costing Income StatementYear 1Year 2Variable expenses:Total variable expensesFixed expenses:Total fixed expensesNet operating income (loss) 2. 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 (Losses)Year 1Year 2Variable costing net operating income (loss)Add (deduct) fixed manufacturing overhead deferred in (released from)inventory under absorption costingAbsorption costing net operating income (loss)

Name: During Heaton Company's first two years of operations, the company re
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Description: During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows:Year 2$ 1,827,0001,073,000754,000333,000$ 421,000Year 1Sales (@ $63 per unit)Cost of goods sold (@ $37 per unit)Gross marg

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During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows Sales (@ $63 per unit) Cost of goods sold (@ $37 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $1,197,000 703,000 494.000 303,000 $ 191,000 Year 2 $ 1,827,000 1,073,000 754,000 333,000 $ 421,000 * $3 per unit variable; $246,000 fixed each year. The company's $37 unit product cost is computed as follows: $ 9 8 1 19 $ 37 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($456,000 + 24,000 units) Absorption costing unit product cost

During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows Sales (@ $63 per unit) Cost of goods sold (@ $37 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $1,197,000 703,000 494.000 303,000 $ 191,000 Year 2 $ 1,827,000 1,073,000 754,000 333,000 $ 421,000 * $3 per unit variable; $246,000 fixed each year. The company's $37 unit product cost is computed as follows: $ 9 8 1 19 $ 37 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($456,000 + 24,000 units) Absorption costing unit product cost

FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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