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

Variable costs per unit:
Direct materials			$	3
Direct labor				9
Variable manufacturing overhead				3
Variable selling and administrative				3
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 $47 per unit. Production and sales data for July and August, the first two months of operations, follow:

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

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

	July			August
Sales	$	1,222,000		$	1,598,000
Cost of goods sold		494,000			646,000
Gross margin		728,000			952,000
Selling and administrative expenses		241,000			265,000
Net operating income	$	487,000		$	687,000

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

		Unit Product Cost
a.	Absorption costing
b.	Variable costing

2. Prepare contribution format variable costing income statements for July and August.

Denton Company
Variable Costing Income Statement
	July	August
Sales
Variable expenses:
Variable cost of goods sold
Variable selling and administrative expenses
Total variable expenses	0	0
Contribution margin	0	0
Fixed expenses:
Fixed manufacturing overhead
Fixed selling and administrative expenses
Total fixed expenses	0	0
Net operating income (loss)	$0	$0

3. 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)