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During Heaton Companys first two years of operations, it reported absorption costing net operating income...

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Accounting

During Heaton Companys first two years of operations, it reported absorption costing net operating income as follows:

Year $1$ Year $2$

Sales $($ @ $ $61$ per unit $)$ $ $1, 037, 000$ $ $1, 647, 000$

Cost of goods sold $($ @ $ $35$ per unit $) 595, 000 945, 000$

Gross margin $442, 000 702, 000$

Selling and administrative expenses $* 301, 000 331, 000$

Net operating income $ $141, 000$ $ $371, 000$

$*$ $ $3$ per unit variable; $ $250, 000$ fixed each year.

The companys $ $35$ unit product cost is computed as follows:

Direct materials $ $10$

Direct labor $10$

Variable manufacturing overhead $1$

Fixed manufacturing overhead $($ $ $308, 000 -$ : $22, 000$ units $) 14$

Absorption costing unit product cost $ $35$

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

Year $1$ Year $2$

Units produced $22, 000 22, 000$

Units sold $17, 000 27, 000$

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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