Problem 6-19 (Algo) Variable Costing Income Statement; Reconciliation [LO,6-1, LO6-2, LO6-3] During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Year 1 $ 1,071,000 Sales (@ $63 per unit) Cost of goods sold (@ $32 per unit) Gross margin Selling and administrative expenses* Net operating income *$3 per unit variable; $249,000 fixed each year. The company's $32 unit product cost is computed as follows: Units produced Direct materials Direct labor Units sold Variable manufacturing overhead Fixed manufacturing overhead ($308,000 ÷ 22,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Year 1 Year 2 22,000 544,000 527,000 300,000 17,000 $ 227,000 22,000 27,000 Year 2 $ 1,701,000 864,000 837,000 330,000 $ 507,000 $7 10 1 14 $32
Problem 6-19 (Algo) Variable Costing Income Statement; Reconciliation [LO,6-1, LO6-2, LO6-3] During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Year 1 $ 1,071,000 Sales (@ $63 per unit) Cost of goods sold (@ $32 per unit) Gross margin Selling and administrative expenses* Net operating income *$3 per unit variable; $249,000 fixed each year. The company's $32 unit product cost is computed as follows: Units produced Direct materials Direct labor Units sold Variable manufacturing overhead Fixed manufacturing overhead ($308,000 ÷ 22,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Year 1 Year 2 22,000 544,000 527,000 300,000 17,000 $ 227,000 22,000 27,000 Year 2 $ 1,701,000 864,000 837,000 330,000 $ 507,000 $7 10 1 14 $32
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Problem 6-19 (Algo) Variable Costing Income Statement; Reconciliation [LO,6-1, LO6-2, LO6-3]
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows:
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows:
Year 1
Year 2
$ 1,071,000
$ 1,701,000
Sales (@ $63 per unit)
Cost of goods sold (@ $32 per unit)
Gross margin
Selling and administrative expenses*
Net operating income
*$3 per unit variable; $249,000 fixed each year.
The company's $32 unit product cost is computed as follows:
Direct materials
Direct labor
Units produced
Units sold
Units produced
Units sold
Variable manufacturing overhead
Fixed manufacturing overhead ($308,000 + 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
17,000
Year 1
22,000
544,000
17,000
527,000
300,000
$ 227,000
22,000
27,000
Year 2
22,000
27,000
864,000
837,000
330,000
$ 507,000
$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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F01354a5b-40f6-44c3-bbdd-77fe2239b81b%2F19f0a2bd-0b02-4c4f-a937-1ac7fdb2339c%2F954taxh_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 6-19 (Algo) Variable Costing Income Statement; Reconciliation [LO,6-1, LO6-2, LO6-3]
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows:
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows:
Year 1
Year 2
$ 1,071,000
$ 1,701,000
Sales (@ $63 per unit)
Cost of goods sold (@ $32 per unit)
Gross margin
Selling and administrative expenses*
Net operating income
*$3 per unit variable; $249,000 fixed each year.
The company's $32 unit product cost is computed as follows:
Direct materials
Direct labor
Units produced
Units sold
Units produced
Units sold
Variable manufacturing overhead
Fixed manufacturing overhead ($308,000 + 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
17,000
Year 1
22,000
544,000
17,000
527,000
300,000
$ 227,000
22,000
27,000
Year 2
22,000
27,000
864,000
837,000
330,000
$ 507,000
$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.
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