Denton 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
$4
11
4
2
$ 21
$ 72,000
163,000
$ 235,000
The product sells for $50 per unit. Production and sales data for July and August, the first two months of operations, follow:
July
August
Units
Units
Produced
Sold
24,000
20,000
24,000
28,000
The company's Accounting Department has prepared the following absorption costing income statements for July and August:
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating income
July
$ 1,000,000
August
$ 1,400,000
440,000
616,000
560,000
784,000
203,000
219,000
$ 357,000
$ 565,000
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.