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During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows: Year 1 Year 2 Sales $60 per
During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows: Year 1 Year 2 Sales $60 per unit) 1,080,000 1,680,000 Cost of goods sold $42 per unit) 756,000 1,176,000 324,000 504,000 margin Selling and administrative expenses 291,600 321,600 Net operating income 32,400 182,400 $3 per unit variable; $237,600 fixed each year. The company's $42 unit product cost is computed as follows: Direct materials 10 Direct labor 12 Variable manufacturing overhead Fixed manufacturing overhead ($414,000 23,000 units) 18 42 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 two years are: Year 1 Year 2 23,000 23,000 18,000 28,000 Units produced Units sold
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