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Problem 6-22 Prepare and Reconcile Variable Costing Statements [LO6-1, LO6-2, LO6-3] Denton Company manufactures and sells a single product. Cost data for the product are given below: Variable costs per unit: Direct materials $4 Direct labor 11 Variable manufacturing overhead 2 Variable selling and administrative 2 Total variable costs per unit $19 Fixed costs per month: Fixed manufacturing overhead $ 120,000 Fixed selling and administrative 172,000 Total fixed cost per month $ 292,000 The product sells for $54 per unit. Production and sales data for July and August, the first two months of operations, are as follows: Units Produced Units Sold July 24,000 20,000 August 24,000 28,000 The companys Accounting Department has prepared absorption costing income statements for July and August as presented below: July August Sales $ 1,080,000 $ 1,512,000 Cost of goods sold 440,000 616,000 Gross margin 640,000 896,000 Selling and administrative expenses 212,000 228,000 Net operating income $ 428,000 $ 668,000 Required: 1. Determine the unit product cost under absorption costing and variable costing. 2. Prepare contribution format variable costing income statements for July and August. 3. Reconcile the variable costing and absorption costing net operating income.

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