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During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (e $63 per unit) Cost of goods sold ( 540 per unit) Gross margin Selling and administrative expenses Net operating income Year 1 $1,071,000 680,000 391.000 301.000 $ 190,0001 Year 2 $1,701,000 1,080,000 621,000 331,000 $ 290,000 ances *$3 per unit variable: $250,000 fixed each year. The company's $40 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($440,000 + 22,000 units) Absorption costing unit product cost 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 22,000 17.000 Year 2 22,000 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. Using variable costing, what is the unit product cost for both years? Unit product cost s 20 What is the variable costing net operating income in Year 1 and in Year 2? (Loss amounts should be indicated with a minus sign.) Year 1 Year 2 Net operating income (loss) RECUT asorption cosung and the variable costing net operating income figures for each year. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Year 1 Variable costing net operating income (loss) Year 2 Absorption costing net operating income Problem 6-22 Variable Costing Income Statements; Income Reconciliation (L06-1, LO6-2, L06-3) Denton Company manufactures and sells a single product. Cost data for the product are given Variable costs per unitt Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Total variable cont per unit Fixed costs per month Fixed manufacturing overhead Fixed selling and administrative Total fixed cost per month $126.000 166,000 $ 292,000 The product sells for $45 per unit. Production and sales data for July and August, the first two months of operations, follow: Units Produced 21.000 21.000 Units Sold 17.000 25.000 July August The company's Accounting Department has prepared the following absorption costing income statements for July and August: Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income July $ 765,000 442,000 323,000 183,000 $ 140,000 August $1,125,000 650,000 475,000 191,000 $ 284,000 Required: 1. Determine the unit product cost under: a. Absorption costing. b. Variable costing. 2. Prepare contribution format variable costing income statements for July and August. 3. Reconcile the variable costing and absorption costing net operating incomes. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Determine the unit product cost under: (a) Absorption costing, (b) Variable costing. Unit Product Cost a. Absorption costing b. Variable costing Prepare contribution format variable costing income statements for July and August. Denton Company Variable Costing Income Statement July August 0 0 0 0 Net operating income (loss) $ $ Required 1 Required 2 Required 3 Reconcile the variable costing and absorption costing net operating incomes. (Enter any losses or deductions as a negative value.) Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes July August Variable costing net operating income (loss) Add (deduct) fixed manufacturing overhead cost deferred in (released from) inventory under absorption costing Absorption costing net operating income (loss)

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