Chapter 7, Problem 19P

Variable Costing Income Statement; Reconciliation L07—2, L07—3
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows:

The company’s $18 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 productionequipment and buildings.

Production and cost data for the first two years of operations are:

Required:
Using variable costing, what is the unit product cost for both years?
What is the variable costing net operating income in Year 1 and in Year 2?
Reconcile the absorption costing and the variable costing net operating income figures for each year.