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				4
Variable selling and administrative				1
Total variable cost per unit			$	17
Fixed costs per month:
Fixed manufacturing overhead	$	108,000
Fixed selling and administrative		166,000
Total fixed cost per month	$	274,000

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	27,000	23,000
August	27,000	31,000

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

	July			August
Sales	$	1,219,000		$	1,643,000
Cost of goods sold		460,000			620,000
Gross margin		759,000			1,023,000
Selling and administrative expenses		189,000			197,000
Net operating income	$	570,000		$	826,000

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

		Unit Product Cost
a.	Absorption costing
b.	Variable costing

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)