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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 (@$35 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 Year 2 $ 976,000 $ 1,586,000 560,000 910,000 416,000 676,000 294,000 324,000 $ 122,000 $ 352,000 *$3 per unit variable: $246,000 fixed each year. The company's $35 unit product cost is computed as follows: Direct materials $ 9 Direct labor 9 Variable manufacturing overhead 4 Fixed manufacturing overhead ($273,000 + 21,000 units) 13 Absorption costing unit product cost $ 35 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced 21,000 21,000 Units sold 16,000 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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