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).