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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: 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

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
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: 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.
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.
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