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During Heaton Companys first two years of operations, it reported absorption costing net operating income as follows: Problem 6-19 (Algo) Variable Costing Income Statement; Reconciliation
During Heaton Companys first two years of operations, it reported absorption costing net operating income as follows:
Problem 6-19 (Algo) Variable Costing Income Statement; Reconciliation (LO,6-1, L06-2, L06- 3] 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) Gross margin Selling and administrative expenses* Net operating income Year 1 $ 1,037,000 646,000 391,000 302,000 $ 89,000 Year 2 $ 1,647,000 1,026,000 621,000 332,000 $ 289,000 * $3 per unit variable; $251,000 fixed each year. The company's $38 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($440,000 + 22,000 units) Absorption costing unit product cost $ 6 9 3 20 $ 38 Production and cost data for the first two years of operations are: Units produced Units sold Year 1 22,000 17,000 Year 2 22,000 27,000 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 yearStep by Step Solution
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