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During Heaton Companys first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $60 per
During Heaton Companys first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $60 per unit) $ 1,020,000 $ 1,620,000 Cost of goods sold (@ $30 per unit) 510,000 810,000 Gross margin 510,000 810,000 Selling and administrative expenses* 305,000 335,000 Net operating income $ 205,000 $ 475,000 * $3 per unit variable; $254,000 fixed each year. The companys $30 unit product cost is computed as follows: Direct materials $ 6 Direct labor 9 Variable manufacturing overhead 2 Fixed manufacturing overhead ($286,000 22,000 units) 13 Absorption costing unit product cost $ 30 Production and cost data for the first two years of operations are
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