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  3. 5.2 denton company manufactures and sells a single

5.2 Denton Company manufactures and sells a single product. Cost data for the product are...

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Accounting

5.2

Denton Company manufactures and sells a single product. Cost data for the product are given below:

Variable costs per unit:
Direct materials $ 5
Direct labor 9
Variable manufacturing overhead 2
Variable selling and administrative 2
Total variable cost per unit $ 18
Fixed costs per month:
Fixed manufacturing overhead $ 120,000
Fixed selling and administrative 163,000
Total fixed cost per month $ 283,000

The product sells for $51 per unit. Production and sales data for July and August, the first two months of operations, are as follows:

Units Produced Units Sold
July 30,000 26,000
August 30,000 34,000

The companys Accounting Department has prepared absorption costing income statements for July and August as presented below:

July August
Sales $ 1,326,000 $ 1,734,000
Cost of goods sold 520,000 680,000
Gross margin $ 806,000 $ 1,054,000
Selling and administrative expenses 215,000 231,000
Net operating income $ 591,000 $ 823,000

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