Assignment
Denton Company manufactures and sells a single product. Cost data for the product are given below:
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Variable costs per unit:
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|
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Direct materials
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$6
|
|
Direct labor
|
11
|
|
Variable manufacturing overhead
|
4
|
|
Variable selling and administrative
|
2
|
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Total variable costs per unit
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$23
|
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Fixed costs per month:
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|
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Fixed manufacturing overhead
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75,000
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Fixed selling and administrative
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163,000
|
|
Total fixed cost per month
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238,000
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The product sells for $51 per unit. Production and sales data for July and August, the first two months of operations, are as follows:
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Units Produced
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Units Sold
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July
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15,000
|
11,000
|
|
August
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15,000
|
19,000
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The company's Accounting Department has prepared absorption costing income statements for July and August as presented below:
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|
July
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August
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Sales
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561,000
|
969,000
|
|
Cost of goods sold
|
286,000
|
494,000
|
|
Gross margin
|
275,000
|
475,000
|
|
Selling and administrative expenses
|
185,000
|
201,000
|
|
Net operating income
|
90,000
|
274,000
|
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.