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During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: ear 1 Year2 Sales(@ $60 per unit) Cost
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: ear 1 Year2 Sales(@ $60 per unit) Cost of goods sold (@ $34 per unit) Gross margirn 612,000 468,000 Selling and administrative expenses304,000 $1,080,000 $1,680,000 952,000 728,000 334,0060 164,000394,000 Net operating income 1 * $3 per unit variable; $250,000 fixed each year The company's $34 unit product cost is computed as follows Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($322,00023,000 units) Absorption costing unit product cost 10 14 $34 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 Year 2 23,000 23,000 18,000 28,008 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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