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: Sales (G $60 per unit) Cost of goods sold ($40 per unit) Gross margin Seling and administrative expenses Net operating income S 1020000 680,000 340 000 1620.000 1.080,000 303000333000 7.000 207.000 $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 tion costing unit cost 5 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: Units produced Units sold 22.000 22.000 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 Complete this question by entering your answers in the tabs below Required Required 2 Required 3 Using variable costing, what is the unit product cost for both years?

Explanation / Answer

1. Unit product cost using variable costing

2. Variable Cost net operating incom

3. Reconciliation

Variable Costs Year 1 Year 2 Direct Material $ 7 $ 7 Direct Labour $ 13 $ 13 Variable Manufacturing Overhead $ 4 $ 4 Selling and Administrative Expenses $ 3 $ 3 Wages and Salaries (40%*16) $ 6.4 $ 6.4 Total unit product cost $ 33.4 $ 33.4

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