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During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales ( $61 per
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales ( $61 per unit) Cost of goods sold ( $31 per unit) Gross margin Selling and administrative expenses* Net operating income 1,220,000 1,830,000 620,000 930,000 900,000 310,000 340,000 $ 560,000 600,000 $ 290,000 $3 per unit variable; $250,000 fixed each year. The company's $31 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($350,000 25,000 units) Absorption costing unit product cost 14 $ 31 Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges orn production equipment and buildings. Production and cost data for the first two years of operatons are Units produced Units sold Year 1 Year 2 25,000 25, 000 20,000 30,000 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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