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uring Heaton Companys first two years of operations, it reported absorption costing net operating income...

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Accounting

uring Heaton Companys first two years of operations, it reported absorption costing net operating income as follows:
Year 1 Year 2
Sales (@ $64 per unit) $ 1,280,000 $ 1,920,000
Cost of goods sold (@ $37 per unit)740,0001,110,000
Gross margin 540,000810,000
Selling and administrative expenses*308,000338,000
Net operating income $ 232,000 $ 472,000
* $3 per unit variable; $248,000 fixed each year.
The companys $37 unit product cost is computed as follows:
Direct materials $ 9
Direct labor 12
Variable manufacturing overhead 4
Fixed manufacturing overhead ($300,000-: 25,000 units)12
Absorption costing unit product cost $ 37
Production and cost data for the first two years of operations are:
Year 1 Year 2
Units produced 25,00025,000
Units sold 20,00030,000
Required:
Using variable costing, what is the unit product cost for both years?
What is the variable costing net operating income in Year 1 and in Year 2?
Reconcile the absorption costing and the variable costing net operating income figures for each year.

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