1 e Seare l https://newconn ect.mheducation.com/flow/connect.html Chapter 6 Duri

Question

1 e Seare l https://newconn ect.mheducation.com/flow/connect.html Chapter 6 During Heaton Company's first two years of operations, it reported absorption costing 5 1,880,0 $ 1,258,88e 90e,806e 10 points Sales ( $25 per unit) Cost of goods sold (e $18 per unit) Gross margin 726,08e 350,800 selling and administrative expenses218,000 Net operating income 230,800 s 70,eee120,800 $2 per unit variable, $130,000 fixed each year The company's $18 unit product cost is computed as follows 4 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($270,000 ÷ 45,eee units) Absorption costing unit product cost 7 $ 18 Forty percent of fixed manufacturing overhead consists of wages and salaries, the remainder consists production equipment and buildings Graw Prey 1 of 1 Next Type here to search 1

Explanation / Answer

1) unit product cost under variable costing Direct materials 4 direct labor 7 variable manufacturing overhead 1 unit product cost under variable costing 12 for both years $26 is the unit product cost 2) Heaton /company Varible costing income statement year 1 year 2 Sales 1,000,000 1,250,000 Variable expenses: Variable cost of goods sold 480000 600000 Variable selling & adm expense 80000 100000 total variable expense 560000 700000 Contribution margin 440,000 550,000 fixed expenses: fixed manufacturing overhead 270,000 270,000 Fixed selling and adm expense 130,000 130,000 total fixed expense 400,000 400,000 net operating income 40,000 150,000 3) Reconcilation year 1 year 2 Variable costing net income 40,000 150,000 Add Fixed oh deferred(released) in ending inventory 30,000 -30,000 Absorption costing net income 70,000 120,000 fixed overhead deferred (released)= ending inventory *FOH per unit 5000*6= 30,000

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