During Heaton Company’s first two years of operations, it reported absorption co

Question

During Heaton Company’s first two years of operations, it 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 (@ $37 per unit) 629,000 999,000 Gross margin 442,000 702,000 Selling and administrative expenses* 297,000 327,000 Net operating income $ e,000 $ 375,000 * $3 per unit variable; $246,000 fixed each year. The company’s $37 unit product cost is computed as follows: Direct materials $ 9 Direct labor 11 Variable manufacturing overhead 1 Fixed manufacturing overhead ($352,000 ÷ 22,000 units) 16 Absorption costing unit product cost $ 37 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 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.

Explanation / Answer

Solution 1:

Solution 2:

Solution 3:

Computation of Unit Product Cost - Variable Costing Particulars Year 1 Year 2 Unit Product Cost: Direct material $9.00 $9.00 Direct Labor $11.00 $11.00 Variable manufacturing overhead $1.00 $1.00 Unit product cost - Variable costing $21.00 $21.00

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.