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 12 $ 24 Fixed costs per month: Fixed manufacturing overhead Fixed selling and administrative Total fixed cost per month $ 90,000 163,000 $ 253,000 The product sells for $52 per unit. Production and sales data for July and August, the first two months of operations, follow: Units Produced 18,000 18,000 Units Sold 14,000 22,000 July August

Explanation / Answer

1a) unit product cost under under Absorption Variable costing costing Direct materials 6 6 Direct labor 12 12 variable manufacturing overhead 3 3 fixed manufacturing oh (90000/18000) 5 unit product cost 26 21 2) contribution income statement july august Sales 728000 1,144,000 less Variable expense variable cost of goods sold 294000 462000 variable Selling and administrative 42000 66000 Contribution margin 392000 616,000 Fixed expense fixed manufacturing overhead 90,000 90,000 fixed selling & administrative 163,000 163,000 net income 139,000 363,000 3) Reconciliation july august net operating income under variable costing 139,000 363,000 fixed overhead deferred in ending inventory 20000 fixed overhead released in opening inventory -20,000 net operating income under absorption costing 159,000 343,000

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