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Sales ( $63 per unit) Cost of goods sold ($29 per unit) Gross margin Selling and administrative expenses* Net operating income *$3 per unit variable; $253,000 fixed each year. The company's $29 unit product cost is computed as follows: Direct materials Direct labor Year 1 Year 2 $ 1,008,000 $1,638,000 464,000 544,000 301,000 $ 243,000 Variable manufacturing overhead Fixed manufacturing overhead ($294,000+ 21,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Units produced Units sold Year 1 21,000 16,000 Year 2 21,000 26,000 754,000 884,000 331,000 $ 553,000 8 1 14 $ 29 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.

Sales ( $63 per unit) Cost of goods sold ($29 per unit) Gross margin Selling and administrative expenses* Net operating income *$3 per unit variable; $253,000 fixed each year. The company's $29 unit product cost is computed as follows: Direct materials Direct labor Year 1 Year 2 $ 1,008,000 $1,638,000 464,000 544,000 301,000 $ 243,000 Variable manufacturing overhead Fixed manufacturing overhead ($294,000+ 21,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Units produced Units sold Year 1 21,000 16,000 Year 2 21,000 26,000 754,000 884,000 331,000 $ 553,000 8 1 14 $ 29 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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Sales ( $63 per unit) Cost of goods sold ( $29 per unit) Gross margin Selling and administrative expenses* Net operating income Direct materials Direct labor *$3 per unit variable; $253,000 fixed each year. The company's $29 unit product cost is computed as follows: Year 1 Year 2 $ 1,008,000 $1,638,000 464,000 Units produced Units sold 544,000 301,000 $ 243,000 Variable manufacturing overhead Fixed manufacturing overhead ($294,000+ 21,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Year 1 21,000 16,000 Year 2 21,000 26,000 754,000 884,000 331,000 $ 553,000 8 1 14 $ 29 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:Sales ( $63 per unit) Cost of goods sold ( $29 per unit) Gross margin Selling and administrative expenses* Net operating income Direct materials Direct labor *$3 per unit variable; $253,000 fixed each year. The company's $29 unit product cost is computed as follows: Year 1 Year 2 $ 1,008,000 $1,638,000 464,000 Units produced Units sold 544,000 301,000 $ 243,000 Variable manufacturing overhead Fixed manufacturing overhead ($294,000+ 21,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Year 1 21,000 16,000 Year 2 21,000 26,000 754,000 884,000 331,000 $ 553,000 8 1 14 $ 29 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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