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During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $60 per unit) Cost of goods
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $60 per unit) Cost of goods sold (@ $34 per unit) Gross margin Selling and administrative expenses Net operating income Year 1 $1,140,000 646,000 494,000 306,000 $ 188,000 Year 2 $1,740,000 986,000 754,000 336,000 $ 418,000 *$3 per unit variable: $249,000 fixed each year. The company's $34 unit product cost is computed as follows: $ 6 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($360,000 - 24,000 units) Absorption costing unit product cost Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the first two years of operatons are: Units produced Units sold Year 1 Year 2 24,000 24,000 19,000 29,000 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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