During Heaton Company’s first two years of operations, itreported absorption costing net operating income...

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Accounting

During Heaton Company’s first two years of operations, itreported absorption costing net operating income as follows: Year 1Year 2 Sales (@ $62 per unit) $ 1,054,000 $ 1,674,000 Cost of goodssold (@ $36 per unit) 612,000 972,000 Gross margin 442,000 702,000Selling and administrative expenses* 303,000 333,000 Net operatingincome $ 139,000 $ 369,000 * $3 per unit variable; $252,000 fixedeach year. The company’s $36 unit product cost is computed asfollows: Direct materials $ 6 Direct labor 11 Variablemanufacturing overhead 4 Fixed manufacturing overhead ($330,000 ÷22,000 units) 15 Absorption costing unit product cost $ 36 Fortypercent of fixed manufacturing overhead consists of wages andsalaries; the remainder consists of depreciation charges onproduction equipment and buildings. Production and cost data forthe first two years of operatons are: Year 1 Year 2 Units produced22,000 22,000 Units sold 17,000 27,000 Required: 1. Using variablecosting, what is the unit product cost for both years? 2. What isthe variable costing net operating income in Year 1 and in Year 2?3. Reconcile the absorption costing and the variable costing netoperating income figures for each year.

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Calculation of Cost per Unit Absorption Costing Variable Costing Direct material 600 600 Direct Labour 1100 1100 Variable Manufacturing Overhead 400 400 Total Variable Cost 2100 2100 Fixed Overhead 33000022000 1500 Cost per Unit 36 21 No of Units Produced See Answer

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In: AccountingDuring Heaton Company’s first two years of operations, itreported absorption costing net operating income as...During Heaton Company’s first two years of operations, itreported absorption costing net operating income as follows: Year 1Year 2 Sales (@ $62 per unit) $ 1,054,000 $ 1,674,000 Cost of goodssold (@ $36 per unit) 612,000 972,000 Gross margin 442,000 702,000Selling and administrative expenses* 303,000 333,000 Net operatingincome $ 139,000 $ 369,000 * $3 per unit variable; $252,000 fixedeach year. The company’s $36 unit product cost is computed asfollows: Direct materials $ 6 Direct labor 11 Variablemanufacturing overhead 4 Fixed manufacturing overhead ($330,000 ÷22,000 units) 15 Absorption costing unit product cost $ 36 Fortypercent of fixed manufacturing overhead consists of wages andsalaries; the remainder consists of depreciation charges onproduction equipment and buildings. Production and cost data forthe first two years of operatons are: Year 1 Year 2 Units produced22,000 22,000 Units sold 17,000 27,000 Required: 1. Using variablecosting, what is the unit product cost for both years? 2. What isthe variable costing net operating income in Year 1 and in Year 2?3. Reconcile the absorption costing and the variable costing netoperating income figures for each year.