7-19 (Static) Variable Costing Income Statement; Reconciliation [LO7-1, 7-2, LO7-3] During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $25 per unit) Cost of goods sold (@ $18 per unit) Gross margin Selling and administrative expenses* Net operating income *$2 per unit variable; $130,000 fixed each year. $ 1,000,000 $1,250,000 Year 1 Year 2 720,000 900,000 280,000 350,000 210,000 230,000 $ 70,000 $ 120,000 The company's $18 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($270,000 + 45,000 units) Absorption costing unit product cost $ 4 7 1 6 $ 18 Production and cost data for the first two years of operations are: Year 1 Year 21 Units produced Units sold 45,000 45,000 40,000 50,000 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 question by entering your answers in the tabs below. Required 11 Required 2 Required 3 Using variable costing, what is the unit product cost for both years? Unit product cost 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? Net operating income (loss) Year 1 Year 2 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. (Enter any losses or deductions as a negative value.) Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Variable costing net operating income (loss) Add (deduct) fixed manufacturing overhead deferred in (released from) inventory Absorption costing net operating income (loss) Year 1 Year 2 < Required 2 Required 3>