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  3. during heaton company's first two years of operati

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

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Accounting

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

Year 1Year 2Sales (@ $62 per unit)$992,000$1,612,000Cost of goods sold (@ $36 per unit)576,000936,000Gross margin416,000676,000Selling and administrative expenses*299,000329,000Net operating income$117,000$347,000

* $3 per unit variable; $251,000 fixed each year.

The company's $36 unit product cost is computed as follows:

Direct materials$9Direct labor11Variable manufacturing overhead3Fixed manufacturing overhead ($273,000 21,000 units)13Absorption costing unit product cost$36

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

Year 1Year 2Units produced21,00021,000Units sold16,00026,000

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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