Denton Company manufactures and sells a single product. Cost data for the product are given:
Variable costs per unit:
Direct materials $
Direct labor
Variable manufacturing overhead
Variable selling and administrative
Total variable cost per unit $
Fixed costs per month:
Fixed manufacturing overhead $
Fixed selling and administrative
Total fixed cost per month $
The product sells for $ per unit. Production and sales data for July and August, the first two months of operations, follow:
Units Produced Units Sold
July
August
The companys Accounting Department has prepared the following absorption costing income statements for July and August:
July August
Sales $ $
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating income $ $
Required:
Determine the unit product cost under:
a Absorption costing.
b Variable costing.
Prepare variable costing income statements for July and August.
Reconcile the variable costing and absorption costing net operating incomes.
