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During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales ( $61 per unit) Cost of goods
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales ( $61 per unit) Cost of goods sold ( $38 per unit). Year 1 $ 1,159,000 Year 2 $1,769,000 722,000 Gross margin Selling and administrative expenses* Net operating income * $3 per unit variable; $248,000 fixed each year. 437,000 305,000 $ 132,000 The company's $38 unit product cost is computed as follows: Direct materials. Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($336,000 24,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Units produced Units sold Year 1 24,000 Year 2 24,000 19,000 29,000 1,102,000 667,000 335,000 $ 332,000 $ 7 13 4 14 $ 38 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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