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During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $62 per unit) Cost of

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During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $62 per unit) Cost of goods sold (@ $35 per unit) Gross margin Selling and administrative expenses* Net operating income $3 per unit variable; $253,000 fixed each year. The company's $35 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($299,000 23,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: $ 8 11 3 13 $ 35 Year 1 $ 1,116,000 630,000 Year 2 $ 1,736,000 980,000 756,000 337,000 $ 179,000 $ 419,000 486,000 307,000 Units produced Units sold Required: Year 1 Year 2 23,000 18,000 23,000 28,000 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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