Required: 1. Determine the unit product cost under: a. Absorption costing. b. Variable costing. 2. Prepare variable costing income statements for July and August. 3. Reconcile the variable costing and absorption costing net operating incomes. Denton Company manufactures and sells a single product. Cost data for the product are given:Variable costs per unit:Direct materialsDirect laborVariable manufacturing overheadVariable selling and administrativeTotal variable cost per unitFixed costs per month:Fixed manufacturing overheadFixed selling and administrativeTotal fixed cost per monthUnitsProduced24,00024,000The product sells for $45 per unit. Production and sales data for July and August, the first two months of operations, follow:$692SalesCost of goods soldGross marginSelling and administrative expensesNet operating income2$19$ 96,000169,000$ 265,000Units Sold20,000,28,000JulyAugustThe company's Accounting Department has prepared the following absorption costing income statements for July and AugustJuly$ 900,000420,000480,000209,000$ 271,000August$1,260,000588,000672,000225,000$ 447,000

The net income is calculated as difference between revenue and expenses. The net income under…

Required: 1. Determine the unit product cost under: a. Absorption costing. b. Variable costing. 2. Prepare variable costing income statements for July and August. 3. Reconcile the variable costing and absorption costing net operating incomes.

Required: 1. Determine the unit product cost under: a. Absorption costing. b. Variable costing. 2. Prepare variable costing income statements for July and August. 3. Reconcile the variable costing and absorption costing net operating incomes.

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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Question

Required:

1. Determine the unit product cost under:

a. Absorption costing.

b. Variable costing.

2. Prepare variable costing income statements for July and August.

3. Reconcile the variable costing and absorption costing net operating incomes.

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
Fixed costs per month:
Fixed manufacturing overhead
Fixed selling and administrative
Total fixed cost per month
Units
Produced
24,000
24,000
The product sells for $45 per unit. Production and sales data for July and August, the first two months of operations, follow:
$6
9
2
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating income
2
$19
$ 96,000
169,000
$ 265,000
Units Sold
20,000,
28,000
July
August
The company's Accounting Department has prepared the following absorption costing income statements for July and August
July
$ 900,000
420,000
480,000
209,000
$ 271,000
August
$1,260,000
588,000
672,000
225,000
$ 447,000

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