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 (@ $42 per unit) Gross margin Selling and administrative expenses. Net operating income Year 1 $ 1,098,000 756,000 342,000 307,000 $ 35,000 Year 2 $ 1,708,000 1,176,000 532,000 337,000 $ 195,000 *$3 per unit variable: $253,000 fixed each year. The company's $42 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($414,000 + 23,000 units) Absorption costing unit product cost S 10 11 3 18 $.42 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 operations are: Units produced Units sold Year 1 23,000 18.000 Year 2 23,000 28,000 Required: 1. Using variable costing, what is the unit product cost for both years? 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Reconcile the absorption costing and the variable costing net operating income figures for each year. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Year 1 Variable costing net operating income (loss) Year 2 Absorption conting net operating income Required 2 Requires High Country, Inc.. produces and sells many recreational products. The company has just opened a new plant to produce a folding camp cot that will be marketed throughout the United States. The following cost and revenue data relate to May, the first month of the plant's operation: 0 38,000 33,000 $ 78 Beginning Inventory Units produced Units sold Selling price per unit Selling and administrative expenses : Variable per unit Pixed (per month) Manufacturing costs: Direct materials cost per unit Direct labor cont per unit Variable manufacturing overhead cost per unit Fixed manufacturing overhead coat (per month) $ 3 $ 563,000 $ 15 $ 6 $ $ 722.000 Management is anxious to assess the profitability of the new camp cot during the month of May. Required: 1. Assume that the company uses absorption costing a. Determine the unit product cost. b. Prepare an income statement for May. 2. Assume that the company uses variable costing a. Determine the unit product cost. b. Prepare a contribution format income statement for May, Complete this question by entering your answers in the table below. Req 1A Reg 18 Req 2A Reg 28 B. Complete this question by entering your answers in the table below. Reg 1A Req 1B Reg 2A Req 2B Prepare a contribution format income statement for May. Assume that the company uses variable costing. High Country, Inc. Variable Costing Income Statement
