Reference no: EM131260910
During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows:
Year 1 Year 2 Sales
(@ $61 per unit) $ 1,098,000 $ 1,708,000
Cost of goods sold (@ $35 per unit) 630,000 980,000
Gross margin 468,000 728,000
Selling and administrative expenses* 305,000 335,000
Net operating income $ 163,000 $ 393,000
*$3 per unit variable; $251,000 fixed each year.
The company’s $35 unit product cost is computed as follows:
Direct materials $ 8
Direct labor 9
Variable manufacturing overhead 4
Fixed manufacturing overhead ($322,000 ÷ 23,000 units) 14
Absorption costing unit product cost $ 35
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 23,000 23,000
Units sold 18,000 28,000
Required:
1. Prepare a variable costing contribution format income statement for each year.
2. Reconcile the absorption costing and the variable costing net operating income figures for each year. (Losses should be indicated by a minus sign.)
|
What is the amount of the annual deposit
: You want to have $75,000 in your savings account 12 years form now, and you've prepared to make equal annual deposits into the account at the end of each year. If the account pays 6.8 percent interest, what amount must you deposit each year? What is ..
|
|
Compute the unit product cost for one barbecue grill
: Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue grill that it sells for $210. Data for last year’s operations follow: Assume that the company uses absorption costing. Compute the unit product cost for one barbecue grill..
|
|
What is the acquisition cost of each asset
: To add to his growing chain of grocery stores, on January 1, 2016, Danny Marks bought a grocery store of a small competitor for $520,000. An appraiser, hired to assess the acquired assets' values, determined that the land, building, and equipment had..
|
|
Determine the acquisition cost of the equipment
: On January 1, 2016, Ruby Company purchased a piece of equipment with a list price of $60,000. The following amounts were related to the equipment purchase: Terms of the purchase were 2/10, net 30. Ruby paid for the purchase on January 8. Determine th..
|
|
Variable costing contribution format income statement
: During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows: Prepare a variable costing contribution format income statement for each year. Reconcile the absorption costing and the va..
|
|
What are long-term care insurance benefits
: What are long-term care insurance benefits? What is the criteria for exclusion? How is the exclusion calculated? (Please give as much bakground information and examples as possible). What is a fringe benefit? What are the different types? How is this..
|
|
Budget variance analysis
: The actual quantity of material used was 31,000 with an actual cost of $7.75 per unit. The actual labor hours were 33,000 with an actual rate per hour of $15. In your budget variance report, discuss each variance. What does the variance tell you? In ..
|
|
Recording petty cash account transactions
: Recording Petty Cash Account Transactions. During March, Anderson Company engaged in the following transactions involving its petty cash fund: On March 1, Anderson Company established the petty cash fund by issuing a check for $1,500 to the fund cust..
|
|
Long-term investment property as short-term property held
: As of January 20, 2015, preliminary financial statement numbers for the year ended December 31, 2014, have been compiled. It looks like Chiso will violate the current ratio loan covenant. Violation could be very costly in two ways. Reclassify "long-t..
|