Reference no: EM133106777
Question - Denton Company manufactures and sells a single product. Cost data for the product are given:
Variable costs per unit: Direct materials $5
Direct labor 10Variable manufacturing overhead 3
Variable selling and administrative 3Total variable cost per unit $21
Fixed costs per month: Fixed manufacturing overhead $72,000
Fixed selling and administrative 163,000
Total fixed cost per month $235,000
The product sells for $46 per unit. Production and sales data for July and August, the first two months of operations, follow:
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Units Produced
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Units Sold
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July
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24,000
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20,000
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August
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24,000
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28,000
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The company's Accounting Department has prepared the following absorption costing income statements for July and August:
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July
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August
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Sales
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$920,000
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$1,288,000
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Cost of goods sold
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420,000
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588,000
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Gross margin
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500,000
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700,000
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Selling and administrative expenses
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223,000
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247,000
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Net operating income
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$277,000
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$453,000
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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.
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