1
answer
0
watching
301
views
28 Sep 2019
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
of depreciation charges on production equipment and buildings.
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 (@ $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.) |
Collen VonLv2
28 Sep 2019