Question
During Heaton Companys first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $62 per unit) $ 1,178,000 $
During Heaton Companys first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $62 per unit) $ 1,178,000 $ 1,798,000 Cost of goods sold (@ $40 per unit) 760,000 1,160,000 Gross margin 418,000 638,000 Selling and administrative expenses* 303,000 333,000 Net operating income $ 115,000 $ 305,000 * $3 per unit variable; $246,000 fixed each year. The companys $40 unit product cost is computed as follows: Direct materials $ 8 Direct labor 10 Variable manufacturing overhead 3 Fixed manufacturing overhead ($456,000 24,000 units) 19 Absorption costing unit product cost $ 40 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced 24,000 24,000 Units sold 19,000 29,000 What is the variable costing net operating income in Year 1 and in Year 2? (Loss amounts should be indicated with a minus sign.) Reconcile the absorption costing and the variable costing net operating income figures for each year.
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