Problem 6-22 Prepare and Reconcile Variable Costing Statements [LO6-1, LO6-2, LO6-3]

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

Variable costs per unit:
Direct materials		$5
Direct labor		11
Variable manufacturing overhead		4
Variable selling and administrative		1
Total variable costs per unit		$21
Fixed costs per month:
Fixed manufacturing overhead	$	96,000
Fixed selling and administrative		166,000
Total fixed cost per month	$	262,000

The product sells for $53 per unit. Production and sales data for July and August, the first two months of operations, are as follows:

	Units Produced	Units Sold
July	24,000	20,000
August	24,000	28,000

The companys Accounting Department has prepared absorption costing income statements for July and August as presented below:

	July		August
Sales	$	1,060,000	$	1,484,000
Cost of goods sold		480,000		672,000
Gross margin		580,000		812,000
Selling and administrative expenses		186,000		194,000
Net operating income	$	394,000	$	618,000

Required:

1.	Determine the unit product cost under absorption costing and variable costing.

2.	Prepare contribution format variable costing income statements for July and August.

3.	Reconcile the variable costing and absorption costing net operating income.