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PROBLEM 6-22 Variable Costing Income Statements; Income Reconciliation L06-1, 106-2, L06-3 prenton Company manufactures and sells a single product. Cost data for the product are given: Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Total variable cost per unit Fixed costs per month: Fixed manufacturing overhead. Fixed selling and administrative Total fixed cost per month $ 7 10 5 3 $25 $315,000 245,000 $560,000 The product sells for $60 per unit. Production and sales data for July and August, the months of operations, follow: July Units Units Produced Sold 17.500 15,000 17,500 20,000 August The company's Accounting Department has prepared the following absorption costing Wit statements for July and August: 800.000 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income July August $900,000 $1.200.000 600,000 300,000 400.000 290,000 305,000 $. 10,000 $ 95,000 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. 4. The company's Accounting Department has determined the company's break-even point to be 16,000 units per month, computed as follows: Fixed cost per month $560,000 Unit contribution margin$35 per unit = 16,000 units "I'm confused," said the president. "The accounting people say that our break-even point is 16.000 units per month, but we sold only 15,000 units in July, and the income statement they prepared shows a $10,000 profit for that month. Either the income statement is wrong or the break evet point is wrong." Prepare a brief memo for the president, explaining what happened on the July absorption costing income statement

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