5.2

Denton Company manufactures and sells a single product. Cost data for the product are given below:

Variable costs per unit:
Direct materials	$	5
Direct labor		9
Variable manufacturing overhead		2
Variable selling and administrative		2
Total variable cost per unit	$	18
Fixed costs per month:
Fixed manufacturing overhead	$	120,000
Fixed selling and administrative		163,000
Total fixed cost per month	$	283,000

The product sells for $51 per unit. Production and sales data for July and August, the first two months of operations, are as follows:

	Units Produced				Units Sold
July		30,000				26,000
August		30,000				34,000

The companys Accounting Department has prepared absorption costing income statements for July and August as presented below:

	July				August
Sales	$	1,326,000			$	1,734,000
Cost of goods sold		520,000				680,000
Gross margin	$	806,000			$	1,054,000
Selling and administrative expenses		215,000				231,000
Net operating income	$	591,000			$	823,000