uring Heaton Company’s first two years of operations, it reported absorption cos
ID: 2573532 • Letter: U
Question
uring Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows:
* $3 per unit variable; $247,000 fixed each year.
The company’s $42 unit product cost is computed as follows:
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 operatons are:
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.
Year 1 Year 2 Sales (@ $62 per unit) $ 1,116,000 $ 1,736,000 Cost of goods sold (@ $42 per unit) 756,000 1,176,000 Gross margin 360,000 560,000 Selling and administrative expenses* 301,000 331,000 Net operating income $ 9,000 $ 229,000Explanation / Answer
1. Using variable costing, what is the unit product cost for both years?
Unit product cost
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 year3. Reconcile the absorption costing and the variable costing net operating income figures for each year
Unit product cost
Direct material 10 Direct labour 13 Variable manufacturing overhead 5 unit product cost 28Related Questions
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