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During Heaton Companys first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $62 per

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

Year 1 Year 2
Sales (@ $62 per unit) $ 992,000 $ 1,612,000
Cost of goods sold (@ $35 per unit) 560,000 910,000
Gross margin 432,000 702,000
Selling and administrative expenses* 299,000 329,000
Net operating income $ 133,000 $ 373,000

* $3 per unit variable; $251,000 fixed each year.

The companys $35 unit product cost is computed as follows:

Direct materials $ 9
Direct labor 9
Variable manufacturing overhead 3
Fixed manufacturing overhead ($294,000 21,000 units) 14
Absorption costing unit product cost $ 35

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 21,000 21,000
Units sold 16,000 26,000

Required:

1. Using variable costing, what is the unit product cost for both years?

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2. What is the variable costing net operating income in Year 1 and in Year 2?

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3. Reconcile the absorption costing and the variable costing net operating income figures for each year.

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Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Using variable costing, what is the unit product cost for both years? Unit product cost Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 --------------- What is the variable costing net operating income in Year 1 and in Year 2? (Loss amounts should be indicated with a minus sign.) Year 1 Year 2 Net operating income (loss) 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 costing net operating income

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