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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 $ 5 Direct labor

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 $ 96,000
Fixed selling and administrative 163,000
Total fixed cost per month $ 259,000

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 24,000 20,000
August 24,000 28,000

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

July August
Sales $ 1,060,000 $ 1,484,000
Cost of goods sold 440,000 616,000
Gross margin 620,000 868,000
Selling and administrative expenses 203,000 219,000
Net operating income $ 417,000 $ 649,000

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.

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