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
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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.](/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.
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