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		12
Variable manufacturing overhead		2
Variable selling and administrative		2
Total variable costs per unit		$21
Fixed costs per month:
Fixed manufacturing overhead	$	60,000
Fixed selling and administrative		166,000
Total fixed cost per month	$	226,000

The product sells for $47 per unit. Production and sales data for July and August, the first two months of operations, are as follows:

	Units Produced	Units Sold
July	15,000	11,000
August	15,000	19,000

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

	July		August
Sales	$	517,000	$	893,000
Cost of goods sold		253,000		437,000
Gross margin		264,000		456,000
Selling and administrative expenses		188,000		204,000
Net operating income	$	76,000	$	252,000
1. Prepare contribution format variable costing income statements for July and August. 2. Reconcile the variable costing and absorption costing net operating income.