During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@$63 per unit) Cost of goods sold (@ $36 per unit) Gross margin Selling and administrative expenses* Net operating income *$3 per unit variable; $253,000 fixed each year. The company's $36 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($418,000 ÷ 22,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Units produced Units sold Year 1 22,000 17,000 Year 2 22,000 27,000 inam $5 9 3 19 $36 Year 1 $ 1,071,000 612,000 459,000 304,000 $ 155,000 Year 2 $ 1,701,000 972,000 729,000 334,000 $ 395,000 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.

During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@$63 per unit) Cost of goods sold (@ $36 per unit) Gross margin Selling and administrative expenses* Net operating income *$3 per unit variable; $253,000 fixed each year. The company's $36 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($418,000 ÷ 22,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Units produced Units sold Year 1 22,000 17,000 Year 2 22,000 27,000 inam $5 9 3 19 $36 Year 1 $ 1,071,000 612,000 459,000 304,000 $ 155,000 Year 2 $ 1,701,000 972,000 729,000 334,000 $ 395,000 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.

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Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter6: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 6PA: Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating...

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