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

Variable costs per unit:
Direct materials		$7
Direct labor		10
Variable manufacturing overhead		5
Variable selling and administrative		3
Total variable cost per unit		$25
Fixed costs per month:
Fixed manufacturing overhead	$	315,000
Fixed selling and administrative		245,000
Total fixed cost per month	$	560,000

The product sells for $60 per unit. Production and sales data for July and August, the first two months of operations, follow:

	Units Produced	Units Sold
July	17,500	15,000
August	17,500	20,000

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

	July		August
Sales	$	900,000	$	1,200,000
Cost of goods sold		600,000		800,000
Gross margin		300,000		400,000
Selling and administrative expenses		290,000		305,000
Net operating income	$	10,000	$	95,000
QUESTIONS 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 figures.

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