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During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $64 per unit) Cost of goods
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $64 per unit) Cost of goods sold ($34 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $ 1,216,000 646,000 570,000 306,000 $ 264,000 Year 2 $ 1,856,000 986,000 870,000 336,000 $ 534,000 *$3 per unit variable: $249,000 fixed each year. The company's $34 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($336,000 - 24,000 units) Absorption costing unit product cost $ 7 10 3 14 $ 34 Production and cost data for the first two years of operations are: Units produced Units sold Year 1 24,000 19,000 Year 2 24,000 29,000 Required: 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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