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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.

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.

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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During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@$62 per unit) Cost of goods sold (@ $42 per unit) Gross margin Selling and administrative expenses* Net operating income *$3 per unit variable; $249,000 fixed each year. The company's $42 unit product cost is computed as follows: Direct materials Direct labor Units produced Units sold Variable manufacturing overhead Fixed manufacturing overhead ($475,000 ÷ 25,000 units) 19 Absorption costing unit product cost $42 Production and cost data for the first two years of operations are: Year 1 Year 2 25,000 20,000 25,000 $ 10 30,000 9 4 $1,240,000 840,000 400,000 309,000 $ 91,000 $ 1,860,000 1,260,000 600,000 339,000 $ 261,000 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.
Transcribed Image Text:During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@$62 per unit) Cost of goods sold (@ $42 per unit) Gross margin Selling and administrative expenses* Net operating income *$3 per unit variable; $249,000 fixed each year. The company's $42 unit product cost is computed as follows: Direct materials Direct labor Units produced Units sold Variable manufacturing overhead Fixed manufacturing overhead ($475,000 ÷ 25,000 units) 19 Absorption costing unit product cost $42 Production and cost data for the first two years of operations are: Year 1 Year 2 25,000 20,000 25,000 $ 10 30,000 9 4 $1,240,000 840,000 400,000 309,000 $ 91,000 $ 1,860,000 1,260,000 600,000 339,000 $ 261,000 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.
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