During Heaton Companyâs first two years of operations, it reported absorption costing net operating income as follows:
Year 1 Year 2 Sales (@ $62 per unit) $ 1,116,000 $ 1,736,000 Cost of goods sold (@ $42 per unit) 756,000 1,176,000 Gross margin 360,000 560,000 Selling and administrative expenses* 301,000 331,000 Net operating income $ \59,000\ $ 229,000
* $3 per unit variable; $247,000 fixed each year.
The companyâs $42 unit product cost is computed as follows:
Direct materials $ 10 Direct labor 13 Variable manufacturing overhead 5 Fixed manufacturing overhead ($322,000 ÷ 23,000 units) 14 Absorption costing unit product cost $ 42
Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings.
Production and cost data for the first two years of operatons 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.
During Heaton Companyâs first two years of operations, it reported absorption costing net operating income as follows:
| Year 1 | Year 2 | ||||
| Sales (@ $62 per unit) | $ | 1,116,000 | $ | 1,736,000 | |
| Cost of goods sold (@ $42 per unit) | 756,000 | 1,176,000 | |||
| Gross margin | 360,000 | 560,000 | |||
| Selling and administrative expenses* | 301,000 | 331,000 | |||
| Net operating income | $ | \59,000\ | $ | 229,000 | |
* $3 per unit variable; $247,000 fixed each year.
The companyâs $42 unit product cost is computed as follows:
| Direct materials | $ | 10 |
| Direct labor | 13 | |
| Variable manufacturing overhead | 5 | |
| Fixed manufacturing overhead ($322,000 ÷ 23,000 units) | 14 | |
| Absorption costing unit product cost | $ | 42 |
Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings.
Production and cost data for the first two years of operatons 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.
Related questions
uring Heaton Companyâs first two years of operations, it reported absorption costing net operating income as follows:
| Year 1 | Year 2 | ||||
| Sales (@ $62 per unit) | $ | 1,116,000 | $ | 1,736,000 | |
| Cost of goods sold (@ $42 per unit) | 756,000 | 1,176,000 | |||
| Gross margin | 360,000 | 560,000 | |||
| Selling and administrative expenses* | 301,000 | 331,000 | |||
| Net operating income | $ | \59,000\ | $ | 229,000 | |
* $3 per unit variable; $247,000 fixed each year.
The companyâs $42 unit product cost is computed as follows:
| Direct materials | $ | 10 |
| Direct labor | 13 | |
| Variable manufacturing overhead | 5 | |
| Fixed manufacturing overhead ($322,000 ÷ 23,000 units) | 14 | |
| Absorption costing unit product cost | $ | 42 |
Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings.
Production and cost data for the first two years of operatons 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.
During Heaton Companyâs first two years of operations, thecompany reported absorption costing net operating income asfollows: |
| Year 1 | Year 2 | |||
| Sales (@ $62 perunit) | $ | 1,116,000 | $ | 1,736,000 |
| Cost of goods sold(@ $30 per unit) | 540,000 | 840,000 | ||
| Gross margin | 576,000 | 896,000 | ||
| Selling andadministrative expenses* | 300,000 | 330,000 | ||
| Net operatingincome | $ | 276,000 | $ | 566,000 |
| * $3 per unit variable; $246,000fixed each year. |
| The companyâs $30 unit productcost is computed as follows: |
| Directmaterials | $ | 8 |
| Direct labor | 9 | |
| Variablemanufacturing overhead | 1 | |
| Fixed manufacturingoverhead ($276,000 ÷ 23,000 units) | 12 | |
| Absorption costingunit product cost | $ | 30 |
Forty percent of fixed manufacturing overhead consists of wagesand salaries; the remainder consists |
| Production and cost data for thetwo years are: |
| Year 1 | Year 2 | |
| Units produced | 23,000 | 23,000 |
| Units sold | 18,000 | 28,000 |
| Required: |
| 1. | Prepare a variable costing contribution format income statementfor each year. |
| 2. | Reconcile the absorption costing and the variable costing netoperating income figures for each year. (Losses should beindicated by a minus sign.) |
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