value 0 points During Heaton Company\'s first two years of operations, the compa
ID: 2714515 • Letter: V
Question
value 0 points During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows ear 1 585,000 330,000 ear Sales (@ $61 per unit) Cost of goods sold ( $39 per unit) $ 915,000 $1,525,000 975,000 Gross margin Selling and administrative expenses 550,000 329,000 299,000 Net operating income $ 31,000 221,000 $3 per unit variable; $254,000 fixed each year The company's $39 unit product cost is computed as follows Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($380,000 ÷ 20,000 units) 10 4 19 Absorption costing unit product cost $ 39 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 two vears are Units produced Units sold Year 1Year 2 20,000 15,000 20,000 25,000Explanation / Answer
Heaton Company Variable costing Income Statement Units sold 15,000 25,000 Details Year 1 Year 2 Sales 915,000 1,525,000 Variable Expenses Variable cost of Goods sold @20/unit 300,000 500,000 Variable Selling & Admin Exp@3/unit 45,000 75,000 Total variable cost of Goods sold 345,000 575,000 Contribution 570,000 950,000 Less : Fixed costs FiXed Mfg OH 380,000 380,000 Fixed selling &admin exp 254,000 254,000 Total Fixed expenses 634,000 634,000 Net Income (64,000) 316,000 Reconciliation of Profit & Loss Variable & Absorption costing Details Year 1 Year 2 Variable costing Net Operating Income /(loss) (64,000) 316,000 Add/Deduct: Fixed manufacturing OH deferred in inventory in Absorption costing @19 /unit for 5000 units 95,000 (95,000) Absorption costing Net Operating Income /(loss) 31,000 221,000
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