80.2K

Verified Solution

Link Copied!

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

Variable costs per unit:
Direct materials		$6
Direct labor		12
Variable manufacturing overhead		4
Variable selling and administrative		2
Total variable costs per unit		$24
Fixed costs per month:
Fixed manufacturing overhead	$	108,000
Fixed selling and administrative		172,000
Total fixed cost per month	$	280,000

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

	Units Produced	Units Sold
July	27,000	23,000
August	27,000	31,000

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

	July		August
Sales	$	1,127,000	$	1,519,000
Cost of goods sold		598,000		806,000
Gross margin		529,000		713,000
Selling and administrative expenses		218,000		234,000
Net operating income	$	311,000	$	479,000

Required:

1.	Determine the unit product cost under absorption costing and variable costing. 1b. Prepare contribution format variable costing income statements for July and August. 1c. Reconcile the variable costing and absorption costing net operating income.

Answer & Explanation Solved by verified expert

See Answer