During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $61 per unit) Cost of goods sold (@$31 per unit) Gross margin Selling and administrative expenses Net operating income *$3 per unit variable; $252,000 fixed each year. The company's $31 unit product cost is computed as follows: Year 1 $ 1,098,000 558,000 540,000 306,000 $ 234,000 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($345,000 + 23,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Year 2 23,000 28,000 Units produced Units sold Year 1 23,000 18,000 Year 2 $ 1,708,000 868,000 840,000 336,000 $ 504,000 $7 1 15 $ 31 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 (@ $61 per unit) Cost of goods sold (@$31 per unit) Gross margin Selling and administrative expenses Net operating income *$3 per unit variable; $252,000 fixed each year. The company's $31 unit product cost is computed as follows: Year 1 $ 1,098,000 558,000 540,000 306,000 $ 234,000 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($345,000 + 23,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Year 2 23,000 28,000 Units produced Units sold Year 1 23,000 18,000 Year 2 $ 1,708,000 868,000 840,000 336,000 $ 504,000 $7 1 15 $ 31 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.

Managerial Accounting

15th Edition

ISBN:9781337912020

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

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

Chapter7: Variable Costing For Management analysis

Section: Chapter Questions

Problem 9E: The following data were adapted from a recent income statement of Caterpillar Inc. (CAT) for the...

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