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 Direct labor Variable manufacturing overhead Variable selling and administrative Total variable cost per unit $ 21 Fixed costs per month: Fixed manufacturing overhead Fixed selling and administrative Total fixed cost per month $ 90,000 169,000 259,000 The product sells for $54 per unit. Production and sales data for July and August, the first two months of operations follow Units Produced 18,000 Units Sold 14,000 22,000 July August 18,000 The company's Accounting Department has prepared the following absorption costing income statements for July and August: July August Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income 756,000 1,188,000 322,000506,000 682,000 235,000 223,000 447,000 34,000 211,000

Explanation / Answer

a) Unit product cost :

b) Variable costing income statement :

Reconcile the variable costing and absorption costing net operating income:

Absorption costing Variable costing Direct material 4 4 Direct labour 11 11 Variable manufacturing o/h 3 3 Fixed manufacturing o/h 5 Unit product cost 23 18

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