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

Variable costs per unit:

 

 Direct materials $ 9 

 

Direct labor $10$

Variable manufacturing overhead $4$

Variable selling and administrative $1$

 

 Total variable cost per unit $ 25 

 

Fixed costs per month:

Fixed manufacturing overhead $ $135,000$

Fixed selling and administrative $169,000$

Total fixed cost per month $ $301,000$

The product sells for $$49$ per unit. Production and sales data for July and August, the first two months of operations, follow:

Units Produced Units Sold

July $27,00023,000$

August $27,00031,000$

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

July August

Sales $ $1,127,000$ $ $1,519,000$

Cost of goods sold $529,000713,000$

Gross margin $598,000806,000$

Selling and administrative expenses $189,000197,000$

Net operating income $ $409,000$ $ $609,000$

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.

Answer rating: 100% (QA)

1 Determine the Unit Product Cost a Absorption Costing Unit Product Cost Total Variable Cost per Uni... View the full answer