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During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows Year 1 Year2 Sales ( $62 per unit)
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows Year 1 Year2 Sales ( $62 per unit) Cost of goods sold (e $32 per unit) Gross margin Selling and administrative expenses* Net operating income $ 1,178,000 1,798,000 608,000 928,000 870,000 309,000 339,000 1261,000531,000 570,000 $3 per unit variable; $252,000 fixed each year. The company's $32 unit product cost is computed as follows Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($312,000 24,000 units) Absorption costing unit product cost 13 $ 32 Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings Production and cost data for the first two years of operatons are Units produced Units sold Year 1 Year 2 24,000 24,000 19,000 29,000 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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