During Heaton Companyâs first two years of operations, thecompany reported absorption costing net operating income asfollows:
Year 1 Year 2 Sales (@ $63 perunit) $ 945,000 $ 1,575,000 Cost of goods sold(@ $39 per unit) 585,000 975,000 Gross margin 360,000 600,000 Selling andadministrative expenses* 273,000 303,000 Net operatingincome $ 87,000 $ 297,000
* $3 per unit variable; $228,000fixed each year.
The companyâs $39 unit productcost is computed as follows:
Directmaterials $ 6 Direct labor 11 Variablemanufacturing overhead 5 Fixed manufacturingoverhead ($285,000 ÷ 20,000 units) 17 Absorption costingunit product cost $ 39
Forty percent of fixed manufacturing overhead consists of wagesand salaries; the remainder consists
of depreciation charges on production equipment and buildings.
Production and cost data for thetwo years are:
Year 1 Year 2 Units produced 20,000 20,000 Units sold 15,000 25,000
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 anddeductions should be indicated with a minus sign.)
During Heaton Companyâs first two years of operations, thecompany reported absorption costing net operating income asfollows: |
| Year 1 | Year 2 | |||
| Sales (@ $63 perunit) | $ | 945,000 | $ | 1,575,000 |
| Cost of goods sold(@ $39 per unit) | 585,000 | 975,000 | ||
| Gross margin | 360,000 | 600,000 | ||
| Selling andadministrative expenses* | 273,000 | 303,000 | ||
| Net operatingincome | $ | 87,000 | $ | 297,000 |
| * $3 per unit variable; $228,000fixed each year. |
| The companyâs $39 unit productcost is computed as follows: |
| Directmaterials | $ | 6 |
| Direct labor | 11 | |
| Variablemanufacturing overhead | 5 | |
| Fixed manufacturingoverhead ($285,000 ÷ 20,000 units) | 17 | |
| Absorption costingunit product cost | $ | 39 |
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 | 20,000 | 20,000 |
| Units sold | 15,000 | 25,000 |
| 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 anddeductions should be indicated with a minus sign.) |
Related questions
During Heaton Companyâs first two years of operations, thecompany reported absorption costing net operating income asfollows: |
| Year 1 | Year 2 | |||
| Sales (@ $63 perunit) | $ | 945,000 | $ | 1,575,000 |
| Cost of goods sold(@ $39 per unit) | 585,000 | 975,000 | ||
| Gross margin | 360,000 | 600,000 | ||
| Selling andadministrative expenses* | 298,000 | 328,000 | ||
| Net operatingincome | $ | 62,000 | $ | 272,000 |
| * $3 per unit variable; $253,000fixed each year. |
| The companyâs $39 unit productcost is computed as follows: |
| Directmaterials | $ | 6 |
| Direct labor | 12 | |
| Variablemanufacturing overhead | 4 | |
| Fixed manufacturingoverhead ($340,000 ÷ 20,000 units) | 17 | |
| Absorption costingunit product cost | $ | 39 |
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 | 20,000 | 20,000 |
| Units sold | 15,000 | 25,000 |
| 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.) |
During Heaton Companyâs first two years of operations, thecompany reported absorption costing net operating income asfollows: |
| Year 1 | Year 2 | |||
| Sales (@ $60 perunit) | $ | 1,080,000 | $ | 1,680,000 |
| Cost of goods sold(@ $31 per unit) | 558,000 | 868,000 | ||
| Gross margin | 522,000 | 812,000 | ||
| Selling andadministrative expenses* | 302,000 | 332,000 | ||
| Net operatingincome | $ | 220,000 | $ | 480,000 |
| * $3 per unit variable; $248,000fixed each year. |
| The companyâs $31 unit productcost is computed as follows: |
| Directmaterials | $ | 7 |
| Direct labor | 8 | |
| Variablemanufacturing overhead | 2 | |
| Fixed manufacturingoverhead ($322,000 ÷ 23,000 units) | 14 | |
| Absorption costingunit product cost | $ | 31 |
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.) |
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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