Problem 6-19 (Algo) Variable Costing Income Statement; Reconciliation [LO,6-1, LO6-2, L06-3) d K nce During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $61 per unit) $ Cost of goods sold (@$37 per 976,000 1,586,000 unit) 592,000 962,000 Gross margin 384,000 624,000 Selling and administrative expenses* 297,000 327,000 Net operating income $ 87,000 $ 297,000 *$3 per unit variable: $249,000 fixed each year, The company's $37 unit product cost is computed as follows: Direct materials $ 8 Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($315,000 + 21,000 units) 15 Absorption costing unit product cost $ 37 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced 21,000 21,000 Units sold 16,000 26,000 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. 12 2 Required Required Required 1 2 3 Using variable costing, what is the unit product cost for both years? Unit product cost Receni Required 2 > Required Required Required 1 21 3 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) Required Required Required 1 2 3 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 Year 1 Year 2 Variable costing net operating income (loss) Add (deduct) fixed manufacturing overhead deferred in (released from) inventory under absorption costing Absorption costing net operating income