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During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows Year 1 Year 2 Sales (e $61 per
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows Year 1 Year 2 Sales (e $61 per unit) Cost of goods sold ( $39 per unit) 1,159,000$1,769,000 741,000r13000 1,131,000 638,000 308,000338,000 Gross margin 418,000 Selling and administrative expenses 1110,0001300,000 Net operating income *$3 per unit variable; $251,000 fixed each year The company's $39 unit product cost is computed as follows Direct materials $ 10 Direct labor 13 Variable manufacturing overhead Fixed manufacturing overhead ($312,00024,000 units) 13 Absorption costing unit product cost $ 39 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: *$3 per unit variable; $251,000 fixed each year The company's $39 unit product cost is computed as follows: 10 13 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($312,000 24,000 units) 13 39 Absorption costing unit product cost 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 Year 1 Year 2 Units produced Units sold 24,000 24,000 19,000 29,000 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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