During Heaton Companyâs first two years of operations, thecompany reported absorption costing net operating income asfollows:
Year 1 Year 2
Sales (@ $64 per unit) $ 1,088,000 $ 1,728,000
Cost of goods sold (@ $36 per unit) 612,000 972,000
Gross margin 476,000 756,000
Selling and administrative expenses* 301,000 331,000
Net operating income $ 175,000 $ 425,000
* $3 per unit variable; $250,000 fixed each year. The companyâs$36 unit product cost is computed as follows: Direct materials $ 6Direct labor 11 Variable manufacturing overhead 3 Fixedmanufacturing overhead ($352,000 ÷ 22,000 units) 16 Absorptioncosting unit product cost $ 36 Forty percent of fixed manufacturingoverhead consists of wages and salaries; the remainder consists ofdepreciation charges on production equipment and buildings.Production and cost data for the two years are: Year 1 Year 2 Unitsproduced 22,000 22,000 Units sold 17,000 27,000 Required: a.Prepare a variable costing contribution format income statement foreach year. b. Reconcile the absorption costing and the variablecosting net operating income figures for each year. (Losses shouldbe indicated 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 (@ $64 per unit) $ 1,088,000 $ 1,728,000
Cost of goods sold (@ $36 per unit) 612,000 972,000
Gross margin 476,000 756,000
Selling and administrative expenses* 301,000 331,000
Net operating income $ 175,000 $ 425,000
* $3 per unit variable; $250,000 fixed each year. The companyâs$36 unit product cost is computed as follows: Direct materials $ 6Direct labor 11 Variable manufacturing overhead 3 Fixedmanufacturing overhead ($352,000 ÷ 22,000 units) 16 Absorptioncosting unit product cost $ 36 Forty percent of fixed manufacturingoverhead consists of wages and salaries; the remainder consists ofdepreciation charges on production equipment and buildings.Production and cost data for the two years are: Year 1 Year 2 Unitsproduced 22,000 22,000 Units sold 17,000 27,000 Required: a.Prepare a variable costing contribution format income statement foreach year. b. Reconcile the absorption costing and the variablecosting net operating income figures for each year. (Losses shouldbe indicated by a minus sign.)
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, 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, itreported absorption costing net operating income as follows:
| Year 1 | Year 2 | ||||
| Sales (@ $64 per unit) | $ | 1,280,000 | $ | 1,920,000 | |
| Cost of goods sold (@ $40 perunit) | 800,000 | 1,200,000 | |||
| Gross margin | 480,000 | 720,000 | |||
| Selling and administrativeexpenses* | 309,000 | 339,000 | |||
| Net operating income | $ | \171,000\ | $ | 381,000 | |
* $3 per unit variable; $249,000 fixed each year.
The companyâs $40 unit product cost is computed as follows:
| Directmaterials | $ | 9 |
| Direct labor | 11 | |
| Variable manufacturingoverhead | 3 | |
| Fixed manufacturing overhead($425,000 ÷ 25,000 units) | 17 | |
| Absorption costing unit productcost | $ | 40 |
Forty percent of fixed manufacturing overhead consists of wagesand salaries; the remainder consists of depreciation charges onproduction equipment and buildings.
Production and cost data for the first two years of operationsare:
| Year 1 | Year 2 | |
| Units produced | 25,000 | 25,000 |
| Units sold | 20,000 | 30,000 |
Required:
1. Using variable costing, what is the unit product cost forboth years?
2. What is the variable costing net operating income in Year 1and in Year 2?
3. Reconcile the absorption costing and the variable costing netoperating income figures for each year.
