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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 labor12
Variable manufacturing overhead3
Variable selling and administrative3
Total variable cost per unit$23
Fixed costs per month:
Fixed manufacturing overhead$135,000
Fixed selling and administrative169,000
Total fixed cost per month$304,000

The product sells for $49 per unit. Production and sales datafor July and August, the first two months of operations,follow:

Units
Produced		Units
Sold
July27,00023,000
August27,00031,000

The company’s Accounting Department has prepared the followingabsorption costing income statements for July and August:

JulyAugust
Sales$1,127,000$1,519,000
Cost of goods sold575,000775,000
Gross margin552,000744,000
Selling and administrative expenses238,000262,000
Net operating income$314,000$482,000

Required:

1. Determine the unit product cost under:

a. Absorption costing.

b. Variable costing.

2. Prepare contribution format variable costing incomestatements for July and August.

3. Reconcile the variable costing and absorption costing netoperating incomes.

Answer & Explanation Solved by verified expert
3.9 Ratings (563 Votes)
Note Since the Format of Variable Costing    See Answer
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