During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows:
Year 1 | Year 2 | ||||
Sales (@ $60 per unit) | $ | 1,080,000 | $ | 1,680,000 | |
Cost of goods sold (@ $38 per unit) | 684,000 | 1,064,000 | |||
Gross margin | 396,000 | 616,000 | |||
Selling and administrative expenses* | 302,000 | 332,000 | |||
Net operating income | $ | 94,000 | $ | 284,000 | |
|
* $3 per unit variable; $248,000 fixed each year.
The company’s $38 unit product cost is computed as follows:
Direct materials | $ | 6 |
Direct labor | 12 | |
Variable manufacturing overhead | 2 | |
Fixed manufacturing overhead ($414,000 ÷ 23,000 units) | 18 | |
Absorption costing unit product cost | $ | 38 |
|
Production and cost data for the first two years of operations are:
Year 1 | Year 2 | |
Units produced | 23,000 | 23,000 |
Units sold | 18,000 | 28,000 |
|
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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During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows:
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $63 per unit) $ 1,134,000 $ 1,764,000 Cost of goods sold (@ $38 per unit) 684,000 1,064,000 Gross margin 450,000 700,000 Selling and administrative expenses* 307,000 337,000 Net operating income $ 143,000 $ 363,000 * $3 per unit variable; $253,000 fixed each year. The company’s $38 unit product cost is computed as follows: Direct materials $ 9...
During Heaton Company's first two years of operations. It reported absorption costing net operating income as follows: Sales (@ $61 per unit) Cost of goods bold ( $38 per unit) Gross margin Selling and administrative expenses Net operating income Year 1 $1,098,000 684,000 414,000 308,000 $\106,000 Year 2 $1,700,000 1,064,000 644,000 338,000 $ 306,000 *$3 per unit variable: $254.000 fixed each year. The company's $38 unit product cost is computed as follows: 12 Direct materials Direct labor Variable manufacturing overhead...
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $60 per unit) $ 1,080,000 $ 1,680,000 Cost of goods sold (@ $33 per unit) 594,000 924,000 Gross margin 486,000 756,000 Selling and administrative expenses* 303,000 333,000 Net operating income $ \183,000\ $ 423,000 * $3 per unit variable; $249,000 fixed each year. The company’s $33 unit product cost is computed as follows: Direct materials $ 6...
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $60 per unit) Cost of goods sold (@ $43 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $ 1,080,000 774,000 306,000 299,000 $ 7,000 Year 2 $1,680,000 1,204,000 476,000 329,000 $ 147,000 * $3 per unit variable; $245,000 fixed each year. The company's $43 unit product cost is computed as follows: Direct materials Direct labor Variable...
During Heaton Company’s first two years of operations, the company reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $60 per unit) $ 1,080,000 $ 1,680,000 Cost of goods sold (@ $30 per unit) 540,000 840,000 Gross margin 540,000 840,000 Selling and administrative expenses* 334,800 364,800 Net operating income $ 205,200 $ 475,200 * $3 per unit variable; $280,800 fixed each year. The...
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $64 per unit) $ 1,088,000 $ 1,728,000 Cost of goods sold (@ $38 per unit) 646,000 1,026,000 Gross margin 442,000 702,000 Selling and administrative expenses* 303,000 333,000 Net operating income $ 139,000 $ 369,000 * $3 per unit variable; $252,000 fixed each year. The company’s $38 unit product cost is computed as follows: Direct materials $ 8...
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $60 per unit) Cost of goods sold (@ $40 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $ 1,080,000 720,000 360,000 302,000 $ 58,000 Year 2 $1,680,000 1,120,000 560,000 332,000 $ 228,000 *$3 per unit variable; $248,000 fixed each year. The company's $40 unit product cost is computed as follows: $ 8 13 Direct materials Direct...
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $63 per unit) $ 1,134,000 $ 1,764,000 Cost of goods sold (@ $27 per unit) 486,000 756,000 Gross margin 648,000 1,008,000 Selling and administrative expenses* 308,000 338,000 Net operating income $ \340,000\ $ 670,000 * $3 per unit variable; $254,000 fixed each year. The company’s $27 unit product cost is computed as follows: Direct materials $ 5...
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $63 per unit) $ 1,134,000 $ 1,764,000 Cost of goods sold (@ $35 per unit) 630,000 980,000 Gross margin 504,000 784,000 Selling and administrative expenses* 307,000 337,000 Net operating income $ 197,000 $ 447,000 * $3 per unit variable; $253,000 fixed each year. The company’s $35 unit product cost is computed as follows: Direct materials $ 8...
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $61 per unit) $ 976,000 $ 1,586,000 Cost of goods sold (@ $38 per unit) 608,000 988,000 Gross margin 368,000 598,000 Selling and administrative expenses* 294,000 324,000 Net operating income $ \74,000\ $ 274,000 * $3 per unit variable; $246,000 fixed each year. The company’s $38 unit product cost is computed as follows: Direct materials $ 8...