Denton Company manufactures and sells a single product. Cost data for the produc

Question

Denton Company manufactures and sells a single product. Cost data for the product are given: Variable costs per unit: Direct materials $ 6 Direct labor 11 Variable manufacturing overhead 4 Variable selling and administrative 1 Total variable cost per unit $ 22 Fixed costs per month: Fixed manufacturing overhead $ 90,000 Fixed selling and administrative 169,000 Total fixed cost per month $ 259,000 The product sells for $55 per unit. Production and sales data for July and August, the first two months of operations, follow: Units Produced Units Sold July 18,000 14,000 August 18,000 22,000 The company’s Accounting Department has prepared the following absorption costing income statements for July and August: July August Sales $ 770,000 $ 1,210,000 Cost of goods sold 364,000 572,000 Gross margin 406,000 638,000 Selling and administrative expenses 183,000 191,000 Net operating income $ 223,000 $ 447,000 Required: 1. Determine the unit product cost under: a. Absorption costing. b. Variable costing. 2. Prepare contribution format variable costing income statements for July and August. 3. Reconcile the variable costing and absorption costing net operating incomes.

Explanation / Answer

1. Determination of the unit product cost:

2. Preparation of the variable costing income statements:

3. Reconciliation of the variable costing and absorption costing net operating incomes:

Absorption costing Variable costing Direct materials $6 $6 Direct labor $11 $11 Variable manufacturing overhead $4 $4 Fixed manufacturing overhead ($90,000/18,000) $5 Unit Product cost $26 $21

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.