What is the variable costing net operating income

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Reference no: EM133052894

Question - 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*

296,000

326,000

Net operating income

$197,000

$457,000

* $3 per unit variable; $245,000 fixed each year.

The company's $34 unit product cost is computed as follows:

Direct materials

$6

Direct labor

12

Variable manufacturing overhead

2

Fixed manufacturing overhead ($308,000 ÷ 22,000 units)

14

Absorption costing unit product cost

$34

Production and cost data for the first two years of operations 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.

Reference no: EM133052894

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