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During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@$63 per unit) Cost of goods
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@$63 per unit) Cost of goods sold (@ $36 per unit) Year 1 $ 1,008,000 576,000 Year 2 $ 1,638,000 936,000 Gross margin Selling and administrative expenses* Net operating income 432,000 303,000 702,000 333,000 $ 129,000 $ 369,000 * $3 per unit variable; $255,000 fixed each year. The company's $36 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($273,000 21,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Units produced Units sold Year 1 21,000 Year 2 16,000 21,000 26,000 $9 12 2 13 $ 36 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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ANSWER 1 Using variable costing the unit product cost for both years would be Direct materials 9 Dir...Get Instant Access to Expert-Tailored Solutions
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