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During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: $ Sales (@ $62 per unit) Cost of
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: $ Sales (@ $62 per unit) Cost of goods sold (@ $36 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $ 1,178,000 684,000 494,000 311,000 $ \183,0001 Year 2 1,798,000 1,044,000 754,000 341,000 413,000 $ * $3 per unit variable: $254,000 fixed each year. The company's $36 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($432,000 - 24,000 units) Absorption costing unit product cost o ONO 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 operatons are Units produced Units sold Year 1 24,000 19,000 Year 2 24,000 29,000 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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