Question

Calendar X ActiveBuilding x Assignments: ACCT 285 x ezto.mheducation.com/hm.tpx Heaton Company Variable Costing Income Statement Year 1 Sales $ 1,197,000 Variable expenses: Variable cost of goods sold Variable selling and administrative expenses Year 2 $ 1,827,000 Total variable expenses 0 0 1,197,000 1,827,000 Contribution margin Fixed expenses Fixed manufacturing overhead Fixed selling and administrative expenses Total fixed expenses Net operating income (loss) 0 0 $ 1,197,000 $ 1,827,000 2. Reconcile the absorption costing and the variable costing net operating income figures for each year. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes (Losses) Year 1 Year 2 Variable costing net operating income (loss) Add (deduct) fixed manufacturing overhead deferred in (released from) inventory under absorption costing Absorption costing net operating income (loss) $ 0 $ 0 15

Answer 1

Answer 1
HEATON COMPANY
Variable costing Income Statement
	Year 1	Year 2
	$	$
Sales	1197000	1827000
Less : Variable Expenses:
variable cost of goods sold	399000	609000
	($21X 19000)	($21X 29000)
variable selling and administrative expenses	57000	87000
	($3X 19000)	($3X 29000)
Total variable Expenses	456000	696000
Contribution margin	741000	1131000
Less : Fixed Expenses
Fixed Manufacturing Overhead
Wages and salaries	152000	232000
	($20X19000 X40%)	($20X29000X40%)
Depreciation of building	228000	348000
	($20X19000 X60%)	($20X29000X60%)
Total Fixed Manufacturing Overhead	380000	580000
Fixed selling expenses	246000	246000
Total Fixed cost	626000	826000
Net operating income	115000	305000
Answer 2
Reconciliation of variable costing and Absorption costing Net operating income (losses)
	Year 1          $	Year 2         $
Variable costing Net operating income	115000	305000
Add :Fixed manufacturing Overhead defferd in inventory	100000
	(5000X$20)
Less:Fixed manufacturing Overhead released from inventory		100000
		(5000 X $20)
Absorption costing net operating income	215000	205000