Problem 4-19 (Algo) Variable Costing Income Statement; Reconciliation [LO4-2, LO4-3] 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 Units produced Units sold 945,000 525,000 420,000 295,000 125,000 *$3 per unit variable; $250,000 fixed each year. The company's $35 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($360,000+ 20,000 units) Absorption costing unit product cost Year 2 $ 1,575,000 875,000 700,000 325,000 375,000 $ bengal $ 35 Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the first two years of operations are: Year 1 Year 2 20,000 20,000 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 2? 3. Reconcile the absorption costing and the variable costing net operating income figures for each year.
Problem 4-19 (Algo) Variable Costing Income Statement; Reconciliation [LO4-2, LO4-3] 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 Units produced Units sold 945,000 525,000 420,000 295,000 125,000 *$3 per unit variable; $250,000 fixed each year. The company's $35 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($360,000+ 20,000 units) Absorption costing unit product cost Year 2 $ 1,575,000 875,000 700,000 325,000 375,000 $ bengal $ 35 Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the first two years of operations are: Year 1 Year 2 20,000 20,000 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 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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![Problem 4-19 (Algo) Variable Costing Income Statement; Reconciliation [LO4-2, LO4-3]
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
$
Units produced
Units sold
$
*$3 per unit variable; $250,000 fixed each year.
The company's $35 unit product cost is computed as follows:
Year 1 Year 2
20,000
15,000
Year 1
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead ($360,000+ 20,000 units)
Absorption costing unit product cost
20,000
25,000
945,000
525,000
420,000
295,000
125,000
Year 2
$ 1,575,000
875,000
700,000
325,000
375,000
$
Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on
production equipment and buildings.
Production and cost data for the first two years of operations are:
$ 6
8
3
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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb0c53c3c-d25b-4f46-ae7f-d9559756d1d4%2F63580321-28b9-48c1-954b-29e7a2aa4e8e%2F1bej0ps_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 4-19 (Algo) Variable Costing Income Statement; Reconciliation [LO4-2, LO4-3]
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
$
Units produced
Units sold
$
*$3 per unit variable; $250,000 fixed each year.
The company's $35 unit product cost is computed as follows:
Year 1 Year 2
20,000
15,000
Year 1
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead ($360,000+ 20,000 units)
Absorption costing unit product cost
20,000
25,000
945,000
525,000
420,000
295,000
125,000
Year 2
$ 1,575,000
875,000
700,000
325,000
375,000
$
Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on
production equipment and buildings.
Production and cost data for the first two years of operations are:
$ 6
8
3
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.
Transcribed Image Text: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.
Answer is complete but not entirely correct.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2 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: Fixed manufacturing overhead cost deferred in inventory under absorption costing
Less: Fixed manufacturing overhead cost released from inventory under absorption costing
Absorption costing net operating income
< Required 2
$ (35,000)
90,000
(125,000)
Year 2
$
(465,000)
(90,000)
(375,000)
X
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