Denton Company manufactures and sells a single product.

Cost data for the product are given:

Variable costs per unit:

Direct materials $ 5

Direct labor 10

Variable manufacturing overhead 3

Variable selling and administrative 2

Total variable cost per unit $ 20

Fixed costs per month:

Fixed manufacturing overhead $ 75,000

Fixed selling and administrative 169,000

Total fixed cost per month $ 244,000

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 15,000 11,000

August 15,000 19,000

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

July August Sales $ 583,000 $ 1,007,000

Cost of goods sold 253,000 437,000

Gross margin 330,000 570,000

Selling and administrative expenses 191,000 207,000

Net operating income $ 139,000 $ 363,000

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.