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Denton Company manufactures and sells a single product. Cost data for the product are given:
| Variable costs per unit: | |
| Direct materials | $ 4 |
| Direct labor | 9 |
| Variable manufacturing overhead | 3 |
| Variable selling and administrative | 2 |
| Total variable cost per unit | $ 18 |
| Fixed costs per month: | |
| Fixed manufacturing overhead | $ 180,000 |
| Fixed selling and administrative | 172,000 |
| Total fixed cost per month | $ 352,000 |
The product sells for $48 per unit. Production and sales data for July and August, the first two months of operations, follow:
| | Units Produced | Units Sold |
| July | 30,000 | 26,000 |
| August | 30,000 | 34,000 |
The companys Accounting Department has prepared the following absorption costing income statements for July and August:
| | July | August |
| Sales | $ 1,248,000 | $ 1,632,000 |
| Cost of goods sold | 572,000 | 748,000 |
| Gross margin | 676,000 | 884,000 |
| Selling and administrative expenses | 224,000 | 240,000 |
| Net operating income | $ 452,000 | $ 644,000 |
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.
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