Question

In: Accounting

During Heaton Company’s first two years of operations, it reported absorption costing net operating income as...

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) $ 1,071,000 $ 1,701,000
Cost of goods sold (@ $30 per unit) 510,000 810,000
Gross margin 561,000 891,000
Selling and administrative expenses* 299,000 329,000
Net operating income $ \262,000\ $ 562,000

* $3 per unit variable; $248,000 fixed each year.

The company’s $30 unit product cost is computed as follows:

Direct materials $ 6
Direct labor 8
Variable manufacturing overhead 1
Fixed manufacturing overhead ($330,000 ÷ 22,000 units) 15
Absorption costing unit product cost $ 30

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 22,000 22,000
Units sold 17,000 27,000

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.

Solutions

Expert Solution


Related Solutions

During Heaton Company’s first two years of operations, it reported absorption costing net operating income as...
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) $ 1,071,000 $ 1,701,000 Cost of goods sold (@ $34 per unit) 578,000 918,000 Gross margin 493,000 783,000 Selling and administrative expenses* 300,000 330,000 Net operating income $ 193,000 $ 453,000 * $3 per unit variable; $249,000 fixed each year. The company’s $34 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...
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) $ 1,037,000 $ 1,647,000 Cost of goods sold (@ $38 per unit) 646,000 1,026,000 Gross margin 391,000 621,000 Selling and administrative expenses* 300,000 330,000 Net operating income $ \91,000\ $ 291,000 * $3 per unit variable; $249,000 fixed each year. The company’s $38 unit product cost is computed as follows: Direct materials $ 7...
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as...
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) $ 915,000 $ 1,525,000 Cost of goods sold (@ $41 per unit) 615,000 1,025,000 Gross margin 300,000 500,000 Selling and administrative expenses* 292,000 322,000 Net operating income $ 8,000 $ 178,000 * $3 per unit variable; $247,000 fixed each year. The company’s $41 unit product cost is computed as follows: Direct materials $ 10...
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as...
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $62 per unit) $ 992,000 $ 1,612,000 Cost of goods sold (@ $38 per unit) 608,000 988,000 Gross margin 384,000 624,000 Selling and administrative expenses* 298,000 328,000 Net operating income $ 86,000 $ 296,000 * $3 per unit variable; $250,000 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...
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $62 per unit) $ 1,054,000 $ 1,674,000 Cost of goods sold (@ $35 per unit) 595,000 945,000 Gross margin 459,000 729,000 Selling and administrative expenses* 300,000 330,000 Net operating income $ \159,000\ $ 399,000 * $3 per unit variable; $249,000 fixed each year. The company’s $35 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...
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) $ 900,000 $ 1,500,000 Cost of goods sold (@ $38 per unit) 570,000 950,000 Gross margin 330,000 550,000 Selling and administrative expenses* 294,000 324,000 Net operating income $ 36,000 $ 226,000 * $3 per unit variable; $249,000 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...
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) $ 1,260,000 $ 1,890,000 Cost of goods sold (@ $43 per unit) 860,000 1,290,000 Gross margin 400,000 600,000 Selling and administrative expenses* 314,000 344,000 Net operating income $ 86,000 $ 256,000 * $3 per unit variable; $254,000 fixed each year. The company’s $43 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...
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $62 per unit) $ 1,054,000 $ 1,674,000 Cost of goods sold (@ $43 per unit) 731,000 1,161,000 Gross margin 323,000 513,000 Selling and administrative expenses* 299,000 329,000 Net operating income $ 24,000 $ 184,000 * $3 per unit variable; $248,000 fixed each year. The company’s $43 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...
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $62 per unit) $ 1,178,000 $ 1,798,000 Cost of goods sold (@ $35 per unit) 665,000 1,015,000 Gross margin 513,000 783,000 Selling and administrative expenses* 312,000 342,000 Net operating income $ 201,000 $ 441,000 * $3 per unit variable; $255,000 fixed each year. The company’s $35 unit product cost is computed as follows: Direct materials $ 6 Direct labor 12 Variable...
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as...
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) $ 945,000 $ 1,575,000 Cost of goods sold (@ $29 per unit) 435,000 725,000 Gross margin 510,000 850,000 Selling and administrative expenses* 297,000 327,000 Net operating income $ \213,000\ $ 523,000 * $3 per unit variable; $252,000 fixed each year. The company’s $29 unit product cost is computed as follows: Direct materials $ 6...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT