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

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Accounting

Denton Company manufactures and sells a single product. Costdata for the product are given:
Variable costs per unit:
Direct materials $ 5
Direct labor 10
Variable manufacturing overhead 3
Variable selling and administrative 1
Total variable cost per unit $ 19
Fixed costs per month:
Fixed manufacturing overhead $ 60,000
Fixed selling and administrative 163,000
Total fixed cost per month $ 223,000
The product sells for $54 per unit. Production and sales datafor July and August, the first two months of operations,follow:
Units
Produced Units
Sold
July 15,000 11,000
August 15,000 19,000
The company’s Accounting Department has prepared the followingabsorption costing income statements for July and August:
July August
Sales $ 594,000 $ 1,026,000
Cost of goods sold 242,000 418,000
Gross margin 352,000 608,000
Selling and administrative expenses 174,000 182,000
Net operating income $ 178,000 $ 426,000
Required:
1. Determine the unit product cost under:
a. Absorption costing.
b. Variable costing.
2. Prepare variable costing income statements for July andAugust.
3. Reconcile the variable costing and absorption costing netoperating incomes.

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Ans 1 In Absorption costing method the unit product cost is the sum of all manufacturing costs per unit whether it is fixed or variable In variable costing method the unit product cost is the sum of only variable manufacturing costs per unit Absorption Variable Direct materials 500 500 Direct labor 1000 1000 Variable manufacturing overhead 300 300 Fixed manufacturing overhead 60000 15000 400 See Answer

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Variable costs per unit:
Direct materials			$	5
Direct labor				10
Variable manufacturing overhead				3
Variable selling and administrative				1
Total variable cost per unit			$	19
Fixed costs per month:
Fixed manufacturing overhead	$	60,000
Fixed selling and administrative		163,000
Total fixed cost per month	$	223,000

	July		August
Sales	$	594,000	$	1,026,000
Cost of goods sold		242,000		418,000
Gross margin		352,000		608,000
Selling and administrative expenses		174,000		182,000
Net operating income	$	178,000	$	426,000