Question
Denton Company manufactures and sells a single product. Cost data for the product are given: Variable costs per unit: Direct materials $ 4 Direct labor
Denton Company manufactures and sells a single product. Cost data for the product are given:
Variable costs per unit: | ||||
Direct materials | $ | 4 | ||
Direct labor | 11 | |||
Variable manufacturing overhead | 3 | |||
Variable selling and administrative | 3 | |||
Total variable cost per unit | $ | 21 | ||
Fixed costs per month: | ||||
Fixed manufacturing overhead | $ | 84,000 | ||
Fixed selling and administrative | 175,000 | |||
Total fixed cost per month | $ | 259,000 | ||
The product sells for $53 per unit. Production and sales data for July and August, the first two months of operations, follow:
Units Produced | Units Sold | |
July | 21,000 | 17,000 |
August | 21,000 | 25,000 |
The companys Accounting Department has prepared the following absorption costing income statements for July and August:
July | August | ||||
Sales | $ | 901,000 | $ | 1,325,000 | |
Cost of goods sold | 374,000 | 550,000 | |||
Gross margin | 527,000 | 775,000 | |||
Selling and administrative expenses | 226,000 | 250,000 | |||
Net operating income | $ | 301,000 | $ | 525,000 | |
Required:
1. Determine the unit product cost under:
a. Absorption costing.
b. Variable costing.
2. Prepare contribution format variable costing income statements for July and August.
3. Reconcile the variable costing and absorption costing net operating incomes.
Requirement 1 Determine the unit product cost under:
|
Prepare contribution format variable costing income statements for July and August.
|
Reconcile the variable costing and absorption costing net operating incomes. (Enter any losses or deductions as a negative value.)
|
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