Reference no: EM131784255

Assignment

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

Variable costs per unit:
Direct materials	$6
Direct labor	11
Variable manufacturing overhead	4
Variable selling and administrative	2
Total variable costs per unit	$23
Fixed costs per month:
Fixed manufacturing overhead	75,000
Fixed selling and administrative	163,000
Total fixed cost per month	238,000

The product sells for $51 per unit. Production and sales data for July and August, the first two months of operations, are as follows:

	Units Produced	Units Sold
July	15,000	11,000
August	15,000	19,000

 The company's Accounting Department has prepared absorption costing income statements for July and August as presented below:

	July	August
Sales	561,000	969,000
Cost of goods sold	286,000	494,000
Gross margin	275,000	475,000
Selling and administrative expenses	185,000	201,000
Net operating income	90,000	274,000

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.