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 Year Sales ( $60 per unit) $ 1,e20,809 1,628,e00 918,609 702,000 578,00 442,000 299,000 5 1143,0001 Cost of goods sold ( $34 per unit) Gross margin Net operating income 373,000 $3 per unit variable: $248,000 foxed each year The company's $34 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($388,00 22,000 units) Absorption costing unit product cost 14 Forty percent of fixed manufacturing overhead consists of wages and salaries, the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the first two years of operatons are Units produced Units sold 22,08 22,000 17,e00 27,000 . Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3 Reconcile the absorption costing and the variable costing net operating income figures for each year Complete this question by entering your answers in the tabs below Required 1 Required 2 Required 3 Recondile the absorption costing and the variable costinidnet operating income figures for each year. (Enter any losses or 3000$ 443.000 (70,000) ariable costing net operaing income (oss ? Required 2

Explanation / Answer

Ans 1 Unit product cost under variable costing Direct Material $5 Direct labor 12 Variable Manufacturing overhead 3 Unit product cost under variable costing $20 Income statement Year 1 Year 2 Sales 1020000 1620000 Less: Variable Cost of goods manufactured 340000 540000 (20*17000) (20*27000) Variable selling and administrative expenses $51,000 81000 Contribution Margin $629,000 $999,000 Less: Fixed expenses Fixed manufacturing overhead: 308000 308000 Fixed selling and administrative expenses: 248000 248000 Net operating income $73,000 $443,000 ans 3 Year 1 Year 2 Variable cost Net operating income $73,000 $443,000 Add:/(deduct) Fixed manufacturing overhead deferred in Inventory under absorption cost 70000 -70000 (5000*14) Absoption costing Net Operating Income $143,000 $373,000 If any doubt please comment

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