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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$4
Direct labor10
Variable manufacturing overhead3
Variable selling and administrative2
Total variable cost per unit$19
Fixed costs per month:
Fixed manufacturing overhead$60,000
Fixed selling and administrative166,000
Total fixed cost per month$226,000

The product sells for $53 per unit. Production and sales datafor July and August, the first two months of operations,follow:

Units
Produced		Units
Sold
July15,00011,000
August15,00019,000

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

JulyAugust
Sales$583,000$1,007,000
Cost of goods sold231,000399,000
Gross margin352,000608,000
Selling and administrative expenses188,000204,000
Net operating income$164,000$404,000

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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