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During Heaton Company's first two years of operations, it reported absorption costing net operating Income as follows: Sales ( $63 per unit) Coat of goods
During Heaton Company's first two years of operations, it reported absorption costing net operating Income as follows: Sales ( $63 per unit) Coat of goods sold (e $44 per unit) Gross margin selling and administrative expenses Net operating income Year 1 $ 1,000,000 704,000 304,000 299,000 $ 5,000 Year 2 $ 1,638,000 1,144,000 494,000 329,000 $ 165,000 $3 per unit variable: $251,000 fixed each year. The company's $44 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($399,000 - 21.000 unita) Absorption costing unit product cost $ 10 10 5 19 $ 44 Production and cost data for the first two years of operations are: Units produced Units sold Year 1 21,000 16,000 Year 2 21,000 26,000 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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