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Denton Company manufactures and sells a single product. Cost data for the product are given: Variable costs per unit: Direct materials $ 6 Direct labor

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 4
Variable selling and administrative 2
Total variable cost per unit $ 24
Fixed costs per month:
Fixed manufacturing overhead $ 150,000
Fixed selling and administrative 172,000
Total fixed cost per month $ 322,000

The product sells for $49 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 $ 1,274,000 $ 1,666,000
Cost of goods sold 702,000 918,000
Gross margin 572,000 748,000
Selling and administrative expenses 224,000 240,000
Net operating income $ 348,000 $ 508,000

Required:

1. Determine the unit product cost under:

a. Absorption costing.

b. Variable costing.

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

3. Reconcile the variable costing and absorption costing net operating incomes.

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