Denton Company manufactures and sells a single product. Cost data for the product are given:Variable costs per unit: Direct materials$ 4Direct labor9Variable manufacturing overhead4Variable selling and administrative2Total variable cost per unit$ 19Fixed costs per month: Fixed manufacturing overhead$ 72,000Fixed selling and administrative169,000Total fixed cost per month$ 241,000The product sells for $47 per unit. Production and sales data for July and August, the first two months of operations, follow: Units ProducedUnits SoldJuly18,00014,000August18,00022,000The company’s Accounting Department prepared the following absorption costing income statements for July and August: JulyAugustSales$ 658,000$ 1,034,000Cost of goods sold294,000462,000Gross margin364,000572,000Selling and administrative expenses197,000213,000Net operating income$ 167,000$ 359,000Required:Determine the unit product cost under:Absorption costing.Variable costing.Prepare variable costing income statements for July and August.Reconcile the variable costing and absorption costing net operating incomes. Complete this question by entering your answers in the tabs below.Required 1 Required 2a. Absorption costingb. Variable costingRequired 3Determine the unit product cost under: (a) Absorption costing, (b) Variable costing$$X Answer is not complete.UnitProductCost2119 Required 1 Required 2 Required 3Prepare variable costing income statements for July and August.SalesVariable expenses:Denton CompanyVariable Costing Income StatementVariable cost of goods soldVariable selling and administrative expensesTotal variable expensesContribution marginFixed expenses:Fixed manufacturing overheadFixed selling and administrative expensesNet operating income (loss)$JulyAugust658,000 $ 1,034,000453,460 X197,000650,4607,540720,000 X169,000712,78044,000756,780277,220241,000 X241,000889,000482,000$ (881,460) $ (204,780)

Variable costs are costs that vary with the change in the level of output whereas fixed costs are…

Answered: Denton Company manufactures and sells a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Variable costs per unit:
Direct materials	$ 4
Direct labor	9
Variable manufacturing overhead	4
Variable selling and administrative	2
Total variable cost per unit	$ 19
Fixed costs per month:
Fixed manufacturing overhead	$ 72,000
Fixed selling and administrative	169,000
Total fixed cost per month	$ 241,000

	Units Produced	Units Sold
July	18,000	14,000
August	18,000	22,000

	July	August
Sales	$ 658,000	$ 1,034,000
Cost of goods sold	294,000	462,000
Gross margin	364,000	572,000
Selling and administrative expenses	197,000	213,000
Net operating income	$ 167,000	$ 359,000

Required:

Determine the unit product cost under:
1. Absorption costing.
2. Variable costing.
Prepare variable costing income statements for July and August.
Reconcile the variable costing and absorption costing net operating incomes.

Required 1 Required 2 Required 3
Prepare variable costing income statements for July and August.
Sales
Variable expenses:
Denton Company
Variable Costing Income Statement
Variable cost of goods sold
Variable selling and administrative expenses
Total variable expenses
Contribution margin
Fixed expenses:
Fixed manufacturing overhead
Fixed selling and administrative expenses
Net operating income (loss)
$
July
August
658,000 $ 1,034,000
453,460 X
197,000
650,460
7,540
720,000 X
169,000
712,780
44,000
756,780
277,220
241,000 X
241,000
889,000
482,000
$ (881,460) $ (204,780)

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