Reference no: EM133064543
Question - Denton Company manufactures and sells a single product. Cost data for the product are given:
Variable costs per unit:
Direct materials $6
Direct labor 11
Variable manufacturing overhead 3
Variable selling and administrative 2
Total variable cost per unit $22
Fixed costs per month:
Fixed manufacturing overhead $54,000
Fixed selling and administrative 172,000
Total fixed cost per month $226,000
The product sells for $55 per unit. Production and sales data for July and August, the first two months of operations, follow:
|
|
Units Produced
|
Units Sold
|
|
July
|
18,000
|
14,000
|
|
August
|
18,000
|
22,000
|
The company's Accounting Department has prepared the following absorption costing income statements for July and August:
|
|
July
|
August
|
|
Sales
|
$770,000
|
$1,210,000
|
|
Cost of goods sold
|
322,000
|
506,000
|
|
Gross margin
|
448,000
|
704,000
|
|
Selling and administrative expenses
|
200,000
|
216,000
|
|
Net operating income
|
$248,000
|
$488,000
|
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.