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: Year 1 Year 2 $1,220,000 $1,830,000 1,170,000 Sales (@ $61 per unit) Cost of goods sold (@ $39 per unit) Gross margin Selling and administrative expenses* Net operating income *$3 per unit variable; $253,000 fixed each year. The company's $39 unit product cost is computed as follows: Direct materials. Direct labor 780,000 440,000 313,000 $ 127,000 Variable manufacturing overhead Fixed manufacturing overhead ($450,000 + 25,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Units produced Units sold Year 1 Year 2 25,000 25,000 20,000 30,000 660,000 343,000 $317,000 $7 10 4 18 $39
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: Year 1 Year 2 $1,220,000 $1,830,000 1,170,000 Sales (@ $61 per unit) Cost of goods sold (@ $39 per unit) Gross margin Selling and administrative expenses* Net operating income *$3 per unit variable; $253,000 fixed each year. The company's $39 unit product cost is computed as follows: Direct materials. Direct labor 780,000 440,000 313,000 $ 127,000 Variable manufacturing overhead Fixed manufacturing overhead ($450,000 + 25,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Units produced Units sold Year 1 Year 2 25,000 25,000 20,000 30,000 660,000 343,000 $317,000 $7 10 4 18 $39
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![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:
Year 1
Year 2
$1,220,000 $1,830,000
780,000
1,170,000
440,000
313,000
$ 127,000
Sales (@ $61 per unit)
Cost of goods sold (@ $39 per unit)
Gross margin
Selling and administrative expenses*
Net operating income
*
*$3 per unit variable; $253,000 fixed each year.
The company's $39 unit product cost is computed as follows:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead ($450,000 ÷ 25,000 units)
Absorption costing unit product cost
Production and cost data for the first two years of operations are:
Units produced
Units sold
Year 1
25,000
20,000
Year 2
25,000
30,000
660,000
343,000
$ 317,000
$7
10
4
18
$ 39
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%2F0bf89d71-1367-4b79-a50f-033a3ea55c3e%2F5bf4874a-1ad3-427e-b3f9-2c35d585421d%2Fduciup_processed.png&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:
Year 1
Year 2
$1,220,000 $1,830,000
780,000
1,170,000
440,000
313,000
$ 127,000
Sales (@ $61 per unit)
Cost of goods sold (@ $39 per unit)
Gross margin
Selling and administrative expenses*
Net operating income
*
*$3 per unit variable; $253,000 fixed each year.
The company's $39 unit product cost is computed as follows:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead ($450,000 ÷ 25,000 units)
Absorption costing unit product cost
Production and cost data for the first two years of operations are:
Units produced
Units sold
Year 1
25,000
20,000
Year 2
25,000
30,000
660,000
343,000
$ 317,000
$7
10
4
18
$ 39
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.
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 5 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Recommended textbooks for you
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![Horngren's Cost Accounting: A Managerial Emphasis…](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
![Intermediate Accounting](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
![Financial and Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education