During Heaton Company\'s first two years of operations, it reported absorption c

Question

During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Year 2 Year 1 1,020,000 Sales (G $60 per unl) Cost of goods sold ( $40 per unit) Gross margin Seling and administrative expenses Net operating income 1.620.000 1,080,000 680,000 0,000000 333.000 37.000 207.000 $3 per unit variable; $252,000 fixed each year The company's $40 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($352,000 22,000 units) 13 16 unit t cost S 40 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 first two years of operations are: Year 1 22,000 22,000 7.000 27000 Units sold 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 Complete this question by entering your answers in the tabs below. Required Required 2 Required Using variable costing, what is the unit product cost for both years?

Explanation / Answer

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2.

3.

Year 1 Year 2 Direct material $      7 $         7 Direct labour $    13 $       13 Variable manufacturing overhead $      4 $         4 Product cost $    24 $       24

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