During Heaton Company’s first two years of operations, the company reported abso

Question

During Heaton Company’s first two years of operations, the company reported absorption costing net operating income as follows:

  

   

  

  

Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists
of depreciation charges on production equipment and buildings.

  

  

  

Prepare a variable costing contribution format income statement for each year.

     

Reconcile the absorption costing and the variable costing net operating income figures for each year. (Losses should be indicated by a minus sign.)

During Heaton Company’s first two years of operations, the company reported absorption costing net operating income as follows:

Explanation / Answer

Answer

Income Statement

Answer- 2 Reconciliation of net operating income:

Particulars Year-1 Year-1 Year-2 Year-2 Sales (year1 19000@63, year-2 29000@63) 1197000 1827000 Less Varable cost of goods sold (Year1 19000@21, year -2 29000@21) 399000 609000 Gross contribution Margin 798000 1218000 Less Variable selling & Administrative Exp. (Year1 19000@3, year -2 29000@3) 57000 87000 Contribution Margin 741000 1131000 Less Fixed Expenses Manufacturing 432000 432000 Selling & Administrative 249000 681000 249000 681000 Net Operating Income 60000 450000

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

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