Hello!

I am seeking help for preparing a 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:

Year 1 Year 2

Sales (@ $64 per unit) $1,280,000 $1,920,000

Cost of goods sold (@ $40 per unit) 800,000 1,200,000

Gross margin 480,000 720,000

Selling and administrative expenses* 308,000 338,000

Net operating income $172,000 $382,000

* $3 per unit variable; $248,000 fixed each year.

The company's $40 unit product cost is computed as follows:

Direct materials $9

Direct labor 12

Variable manufacturing overhead 1

Fixed manufacturing overhead ($450,000 / 25,000 units) 18

Absorption costing unit product cost $40

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 25,000 25,000

Units sold 20,000 30,000

Required:

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

Heaton Company

Variable Costing Income Statement

Year 1 Year 2

Sales $1,280,000 $1,920,000

Variable Expenses: ? ?

Variables of cost of goods sold ? ?

Variable selling& administrative exp ? ?

Total variable expenses ? ?

Contribution margin ? ?

Fixed expenses:

Fixed manufacturing overhead ? ?

Fixed selling & administrative exp ? ?

Total fixed expenses ? ?

Net operating income (loss) ? ?

Any help and all guidance is greatly appreciated! Thank you in advanced.

During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows: Cost of goods sold (@ $40 per unit) Year 1 $ 1,280,00 0 800,000 Gross margin Selling and administrative expenses* Net operating income 480,000 308,000 $ 172,000 Sales (@ $64 per unit) Year 2 $ 1,920,00 0 1,200,00 0 720,000 338,000 $ 382,000 * $3 per unit variable; $248,000 fixed each year. The company's $40 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($450,000 25,000 units) Absorption costing unit product cost $ 9 12 1 18 $ 40 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: Units produced Units sold Year 1 25,000 20,000 Year 2 25,000 30,000 Required: 1. Prepare a variable costing contribution format income statement for each year. Heaton Company Variable Costing Income Statement Sales Variable Expenses: Variables of cost of goods sold Variable selling & administrative expenses Year 1 $1,280,000 Year 2 $1,920,000 Total Variable Expenses Contribution Margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative expenses Total Fixed Expenses Net operating income (loss) 2. Reconcile the absorption costing and the variable costing net operating income figures for each year. Reconciliation of variable costing and absorption costing net operating incomes (losses) Year 1 Variable costing net income (loss) Add (deduct fixed manufacturing overhead deferred in (released from) inventory under absorption costing Year 2 Absorption costing net operating income (loss)