Reference no: EM132659510

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

Variable costs per unit:

Direct materials $5

Direct labor 9

Variable manufacturing overhead 3

Variable selling and administrative 2

Total variable cost per unit $19

Fixed costs per month:

Fixed manufacturing overhead $126,000

Fixed selling and administrative $163,000

Total fixed cost per month $289,000

The product sells for $54 per unit. Production and sales data for July and August, the first two months of operations, follow:

                             Units               Units

                         Produced            Sold

July                21,000            17,000

August           21,000              25,000

The company's Accounting Department has prepared the following absorption costing income statements for July and August:

                                                     July                         August

Sales                               $918,000                  $1,350,000

Cost of goods sold                 391,000                     575,000

Gross margin                          527,000                   775,000

Selling and administrative expenses  197,000                213,000

Net operating income                  $330,000                $562,000

Required:

Problem 1. Determine the unit product cost under:

a. Absorption costing.

b. Variable costing.

Problem 2. Prepare variable costing income statements for July and August.

Problem 3. Reconcile the variable costing and absorption costing net operating incomes.