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

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Accounting

Denton Company manufactures and sells a single product. Cost data for the product are given:
Variable costs per unit:
Direct materials $ 4
Direct labor 11
Variable manufacturing overhead 3
Variable selling and administrative 3
Total variable cost per unit $ 21
Fixed costs per month:
Fixed manufacturing overhead $ 90,000
Fixed selling and administrative 172,000
Total fixed cost per month $ 262,000
The product sells for $45 per unit. Production and sales data for July and August, the first two months of operations, follow:
Units
Produced Units
Sold
July 15,00011,000
August 15,00019,000
The companys Accounting Department has prepared the following absorption costing income statements for July and August:
July August
Sales $ 495,000 $ 855,000
Cost of goods sold 264,000456,000
Gross margin 231,000399,000
Selling and administrative expenses 205,000229,000
Net operating income $ 26,000 $ 170,000
Required:
1. Determine the unit product cost under:
a. Absorption costing.
b. Variable costing.
2. Prepare variable costing income statements for July and August.
3. Reconcile the variable costing and absorption costing net operating incomes.

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