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: 3 10 2 1 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 $ 16 $ 90,000 163,000 $ 253,000 The product sells for $54 per unit. Production and sales data for July and August, the first two months of operations, follow: Units Sold July August Units Produced 18,000 18,000 14,000 22,000 The company's Accounting Department has prepared the following absorption costing income statements for July and August: Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income July $ 756,000 280,000 476,000 177,000 $ 299,000 August $ 1,188,000 440,000 748,000 185,000 563,000