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 2 Sales (@$61 per unit) Cost of goods sold (@ $42 per unit) Gross margin Selling and administrative expenses* Net operating income $3 per unit variable; $251,000 fixed each year. Year 1 $ 976,000 672,000 $ 1,586,000 1,092,000 304,000 299,000 494,000 329,000 $ 5,000 $ 165,000 The company's $42 unit product cost is computed as follows: Direct materials Direct labor S Variable manufacturing overhead Fixed manufacturing overhead ($399,000 21,000 units) Absorption costing unit product cost $ 9 11 3 19 $ 42 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced Units sold 21,000 16,000 21,000 26,000 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. Complete this Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the variable costing net operating income in Year 1 and in Year 2? (Loss amounts should be indicated with sign.) Year 1 Year 2 Net operating income (loss) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Reconcile the absorption costing and the variable costing net operating income figures for each year. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Year 1 Year 2 Variable costing net operating income (loss) Add (deduct) fixed manufacturing overhead deferred in (released from) inventory under absorption costing Absorption costing net operating income During Heaton Company's first two years of operations, it reported absorption costing net op Sales (@ $61 per unit) Cost of goods sold (@ $42 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $ 976,000 Year 2 $ 1,586,000 672,000 1,092,000 304,000 299,000 494,000 329,000 $ 5,000 $ 165,000 $3 per unit variable; $251,000 fixed each year. The company's $42 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($399,000 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 Year 2 21,000 21,000 16,000 26,000 $ 9 11 3 19 $ 42