Problem 6-19 (Algo) Variable Costing Income Statement; Reconciliation [LO,6-1, LO6-2, LO6-3] During Heaton Company's first two...
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Problem 6-19 (Algo) Variable Costing Income Statement; Reconciliation [LO,6-1, LO6-2, LO6-3] 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 (@ $46 per unit) Gross margin Selling and administrative expenses* Net operating income $3 per unit variable: $253,000 fixed each year. Year 1 Year 2 $ 1,071,000 $1,701,000 782,000 289,000 304,000 1,242,000 459,000 334,000 $ -15,000 $ 125,000 The company's $46 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($440,000 + 22,000 units) Absorption costing unit product cost $9 13 4 20 $ 46 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced 22,000 22,000 Units sold 17,000 27,000 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. Problem 6-19 (Algo) Variable Costing Income Statement; Reconciliation [LO,6-1, LO6-2, LO6-3] 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 (@ $46 per unit) Gross margin Selling and administrative expenses* Net operating income $3 per unit variable: $253,000 fixed each year. Year 1 Year 2 $ 1,071,000 $1,701,000 782,000 289,000 304,000 1,242,000 459,000 334,000 $ -15,000 $ 125,000 The company's $46 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($440,000 + 22,000 units) Absorption costing unit product cost $9 13 4 20 $ 46 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced 22,000 22,000 Units sold 17,000 27,000 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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