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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 (@ $63
During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows:
| Year 1 | Year 2 | |
| Sales (@ $63 per unit) | $1,071,000 | $1,701,000 |
| Cost of goods sold (@ $36 per unit) | 612,000 | 972,000 |
| Gross margin | 459,000 | 729,000 |
| Selling and administrative expenses* | 304,000 | 334,000 |
| Net operating income (loss) | $155,000 | $395,000 |
| *$3 per unit variable; $253,000 fixed each year. |
| The company's $36 unit product cost is computed as follows |
| Direct materials | $9 |
| Direct labor | 9 |
| Variable manufacturing overhead | 1 |
| Fixed manufacturing overhead ($374,000 |
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Bed And Breakfast IRS Audit Techniques Guide
Authors: Internal Revenue Service
1st Edition
1304131793, 978-1304131799
