Problem $7-19($Algo$)$ Variable Costing Income Statement; Reconciliation $[$LO$,7-1,$ LO$7-2,$ LO$7-3]$

During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows:

$$3$ per unit variable; $$254,000$ fixed each year.

The company's $$39$ unit product cost is computed as follows:

Production and cost data for the first two years of operations are:

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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Required $2$

Using variable costing, what is the unit product cost for both years?Problem $7-19($Algo$)$ Variable Costing Income Statement; Reconciliation $[$LO$,7-1,$ LO$7-2,$ LO$7-3]$

During Heaton Company$$s first two years of operations, it reported absorption costing net operating income as follows:

Year $1$ Year $2$

Sales $($@ $$60$ per unit$)$ $ $960,000$ $ $1,560,000$

Cost of goods sold $($@ $$39$ per unit$)624,0001,014,000$

Gross margin $336,000546,000$

Selling and administrative expenses$*302,000332,000$

Net operating income $ $34,000$ $ $214,000$

$*$ $$3$ per unit variable; $$254,000$ fixed each year.

The company$$s $$39$ unit product cost is computed as follows:

Direct materials $ $7$

Direct labor $12$

Variable manufacturing overhead $4$

Fixed manufacturing overhead $($$$336,000-$: $21,000$ units$)16$

Absorption costing unit product cost $ $39$

Production and cost data for the first two years of operations are:

Year $1$ Year $2$

Units produced $21,00021,000$

Units sold $16,00026,000$

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.