During Heaton Companys first two years of operations, it reported absorption costing net operating income as follows:

	Year 1	Year 2
Sales (@ $60 per unit)	$ 1,020,000	$ 1,620,000
Cost of goods sold (@ $36 per unit)	612,000	972,000
Gross margin	408,000	648,000
Selling and administrative expenses*	303,000	333,000
Net operating income	$ 105,000	$ 315,000

* $3 per unit variable; $252,000 fixed each year.

The companys $36 unit product cost is computed as follows:

Direct materials	$ 6
Direct labor	10
Variable manufacturing overhead	2
Fixed manufacturing overhead ($396,000 22,000 units)	18
Absorption costing unit product cost	$ 36

Production and cost data for the first two years of operations are:

	Year 1	Year 2
Units produced	22,000	22,000
Units sold	17,000	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 year.

Shannon Company segments its income statement into North and South Divisions. The companys overall sales, contribution margin ratio, and net operating income are $490,000, 38%, and $9,800, respectively. The North Divisions contribution margin and contribution margin ratio are $100,800 and 42%, respectively. The South Divisions segment margin is $35,000. The company has $68,600 of common fixed expenses that cannot be traced to either division.

Required:

Prepare a segmented income statement for Shannon Company using the contribution format. For the company as a whole and for each division, show each item on the segmented income statements as a percent of sales.

Exercise 6-7 (Algo) Segmented Income Statement [LO6-4] Shannon Company segments its income statement into North and South Divisions. The company's overall sales, contribution margin ratio, and net operating income are $490,000,38%, and $9,800, respectively. The North Division's contribution margin and contribution margin ratio are $100,800 and 42%, respectively. The South Division's segment margin is $35,000. The company has $68,600 of common fixed expenses that cannot be traced to either division. Required: Prepare a segmented income statement for Shannon Company using the contribution format. For the company as a whole and for each division, show each item on the segmented income statements as a percent of sales. Note: Round your percentage answers to 1 decimal place (i.e .1234 should be entered as 12.3)