Problem 6-19 Variable Costing Income Statement; Reconciliation [LO6-2, LO6-3] Du
ID: 2544593 • Letter: P
Question
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: 15 points Year 1 Year 2 $ 1,88,888 1,728,880 Sales (e $64 per unit) Cost of goods sold ( $36 per unit) Gross margin Selling and administrative expenses Net operating income 612,008 476,808 299,800 972,80 eBook 756,800 329,800 Print s 1177,000427,880 References $3 per unit variable; $248,000 fixed each year The company's $36 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($286,000 ÷ 22,000 units) Absorption costing unit product cost 12 13 s 36 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 operations are Units produced Units sold Year 1 Year 2 22,000 22,00 17,008 27,000 Next > Mc Prev 1 of 2Explanation / Answer
1 Year 1 Year 2 Direct materials 7 7 Direct labor 12 12 Variable manufacturing overhead 4 4 Unit product cost 23 23 2 Year 1 Year 2 Sales 1088000 $1,728,000 Variable expenses: Variable cost of goods sold 391000 621000 Variable selling and administrative expenses 51000 81000 Total Variable expenses 442000 702000 Contribution margin 646000 1026000 Fixed expenses: Fixed manufacturing overhead 286000 286000 Fixed selling and administrative expenses 248000 248000 Total Fixed expenses 534000 534000 Net operatimg income(loss) $112,000 $492,000 3 Year 1 Year 2 Variable costing net income $112,000 $492,000 Add(deduct) fixed manufacturing overhead deferred in(released) 65000 -65000 Absorption costing net operating income $177,000 $427,000