Please Answer All Questions Problem 6-19 Variable Costing Income Statement; Reco
ID: 2535487 • Letter: P
Question
Please Answer All Questions
Problem 6-19 Variable Costing Income Statement; Reconciliation [LO6-2, LO6-3] 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) Cost of goods sold ( $42 per unit) Gross margin Selling and administrative expenses* Net operating income 1,260,000 1,890,000 840,000260 000 630,000 311,00000 420,000 341,000 $ 289,000 $ 109,000 $3 per unit variable; $251,000 fixed each year. The company's $42 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($450,000 ÷ 25,000 units) Absorption costing unit product cost 10 18 $ 42 Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges orn production equipment and buildings. Production and cost data for the first two years of operations are Units produced Units sold Year 1 Year 2 25,000 25,000 20,000 30,000 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.Explanation / Answer
Answer:
1
Heaton Compnay
Variable costing income statement
Year 1
(20,000)
Year 2
(30,000)
Sales
1,260,000
1,890,000
Variable expenses:
Variable cost of goods sold(9+10+5=24)
480000
720000
Variable selling & adm exp (3*units)
60000
90000
Contribution margin
720,000
1,080,000
Fixed expenses:
Fixed manufacturing overhead
450,000
450,000
Selling & adm expense
251,000
251,000
Total ficed exp
701,000
701,000
Net operatimg income
$19,000
$379,000
2
Variable selling & adm exp
For year 1
=20,000*3
=60,000
for the year-2
=30,000*3
=90,0000
____________________________________
3
year 1
year 2
variable costing net income
$19,000
$379,000
fixed overhead deferred
90000
-90000
Absorption costing net operating income
$109,000
289,000
fixed overhead deferred
For year 1
=5,000*18
=90,000
for the year-2
=5,000*18
=90,0000
Heaton Compnay
Variable costing income statement
Year 1
(20,000)
Year 2
(30,000)
Sales
1,260,000
1,890,000
Variable expenses:
Variable cost of goods sold(9+10+5=24)
480000
720000
Variable selling & adm exp (3*units)
60000
90000
Contribution margin
720,000
1,080,000
Fixed expenses:
Fixed manufacturing overhead
450,000
450,000
Selling & adm expense
251,000
251,000
Total ficed exp
701,000
701,000
Net operatimg income
$19,000
$379,000