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

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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 9
Variable manufacturing overhead 3
Variable selling and administrative 2
Total variable cost per unit $ 18
Fixed costs per month:
Fixed manufacturing overhead $ 180,000
Fixed selling and administrative 172,000
Total fixed cost per month $ 352,000

The product sells for $48 per unit. Production and sales data for July and August, the first two months of operations, follow:

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

The companys Accounting Department has prepared the following absorption costing income statements for July and August:

July August
Sales $ 1,248,000 $ 1,632,000
Cost of goods sold 572,000 748,000
Gross margin 676,000 884,000
Selling and administrative expenses 224,000 240,000
Net operating income $ 452,000 $ 644,000

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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