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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
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 $6 11 3 2 $ 22 $ 135,000 163,000 $ 298,000 The product sells for $50 per unit. Production and sales data for July and August, the first two months of operations, follow: July August Units Produced 27,000 27,000 Units Sold 23,000 31,000 The company's Accounting Department has prepared the following absorption costing income statements for July and August: Sales Cost of goods sold Gross margin July August $1,150,000 $1,550,000 575,000 775,000 575,000 775,000 209,000 225,000 $ 366,000 $ 550,000 Selling and administrative expenses Net operating income Required: 1. Determine the unit product cost under: a. Absorption costing. b. Variable costing. 2. Prepare variable costing income statements for July and August. B. Reconcile the variable costing and absorption costing net operating incomes
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