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

Variable costs per unit:
Direct materials			$	6
Direct labor				12
Variable manufacturing overhead				2
Variable selling and administrative				2
Total variable cost per unit			$	22
Fixed costs per month:
Fixed manufacturing overhead	$	108,000
Fixed selling and administrative		169,000
Total fixed cost per month	$	277,000

The product sells for $48 per unit. Production and sales data for July and August, the first two months of operations, follow:

	Units Produced	Units Sold
July	18,000	14,000
August	18,000	22,000

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

	July			August
Sales	$	672,000		$	1,056,000
Cost of goods sold		364,000			572,000
Gross margin		308,000			484,000
Selling and administrative expenses		197,000			213,000
Net operating income	$	111,000		$	271,000

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

Vulcan Companys contribution format income statement for June is as follows:

Vulcan Company Income Statement For the Month Ended June 30
Sales	$	900,000
Variable expenses		408,000
Contribution margin		492,000
Fixed expenses		465,000
Net operating income	$	27,000

Management is disappointed with the companys performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following:

1. The company is divided into two sales territoriesNorthern and Southern. The Northern Territory recorded $400,000 in sales and $168,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern Territory. Fixed expenses of $212,000 and $130,000 are traceable to the Northern and Southern Territories, respectively. The rest of the fixed expenses are common to the two territories.
2. The company is the exclusive distributor for two productsPaks and Tibs. Sales of Paks and Tibs totaled $200,000 and $200,000, respectively, in the Northern territory during June. Variable expenses are 25% of the selling price for Paks and 59% for Tibs. Cost records show that $90,000 of the Northern Territorys fixed expenses are traceable to Paks and $40,000 to Tibs, with the remainder common to the two products.

Required:

1-a. Prepare contribution format segmented income statements for the total company broken down between sales territories.

1-b. Prepare contribution format segmented income statements for the Northern Territory broken down by product line.

Lynch Company manufactures and sells a single product. The following costs were incurred during the companys first year of operations:

Variable costs per unit:
Manufacturing:
Direct materials	$	14
Direct labor	$	3
Variable manufacturing overhead	$	1
Variable selling and administrative	$	1
Fixed costs per year:
Fixed manufacturing overhead	$	290,000
Fixed selling and administrative	$	200,000

During the year, the company produced 29,000 units and sold 22,000 units. The selling price of the companys product is $42 per unit.

Required:

1. Assume that the company uses absorption costing:

a. Compute the unit product cost.

b. Prepare an income statement for the year.

2. Assume that the company uses variable costing:

a. Compute the unit product cost.

b. Prepare an income statement for the year.