Forty percent of fixed manufacturing overhead consists of

Reference no: EM13580826

During Heaton Company's first two years of operations, the company 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 (@ $36 per unit)	612,000	972,000
Gross margin	459,000	729,000
Selling and administrative expenses*	304,000	334,000
Net operating income (loss)	$155,000	$395,000

*$3 per unit variable; $253,000 fixed each year.

The company's $36 unit product cost is computed as follows


Direct materials	$9
Direct labor	9
Variable manufacturing overhead	1
Fixed manufacturing overhead ($374,000 ÷ 22,000 units)	17
Absorption costing unit product cost	$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 two years are:

	Year 1	Year 2
Units produced	22,000	22,000
Units sold	17,000	27,000

Prepare a variable costing contribution format income statement for each year.

Explain to me how you get these : ( I have tried every possible solution!) the variable cost of goods sold variable selling and adimistrative expense contribution margin fixed expenses ( manufacturing overhead + selling & admistratuve expense).

Reference no: EM13580826

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