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

Variable costs per unit:
Direct materials	$ 3
Direct labor	12
Variable manufacturing overhead	3
Variable selling and administrative	1
Total variable cost per unit	$ 19
Fixed costs per month:
Fixed manufacturing overhead	$ 72,000
Fixed selling and administrative	166,000
Total fixed cost per month	$ 238,000

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	24,000	20,000
August	24,000	28,000

The companys Accounting Department has prepared the following absorption costing income statements for July and August:

	July	August
Sales	$ 1,060,000	$ 1,484,000
Cost of goods sold	420,000	588,000
Gross margin	640,000	896,000
Selling and administrative expenses	186,000	194,000
Net operating income	$ 454,000	$ 702,000

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.

Determine the unit product cost under: (a) Absorption costing, (b) Variable costing.

	Unit Product Cost
a. Absorption costing	$
b. Variable costing	$

Prepare variable costing income statements for July and August.

Denton Company
Variable Costing Income Statement
	July	August
	0	0
	0	0
	0	0
Net operating income (loss)	$0	$0

Reconcile the variable costing and absorption costing net operating incomes. (Enter any losses or deductions as a negative value.)

Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes
	July	August
Variable costing net operating income (loss)
Add (deduct) fixed manufacturing overhead cost deferred in (released from) inventory under absorption costing
Absorption costing net operating income (loss)