Determine the unit product cost under absorption costing

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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.

Reference no: EM131784255

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