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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 $ 3 Direct labor

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

Variable costs per unit:
Direct materials $ 3
Direct labor 11
Variable manufacturing overhead 3
Variable selling and administrative 2
Total variable cost per unit $ 19
Fixed costs per month:
Fixed manufacturing overhead $ 84,000
Fixed selling and administrative 172,000
Total fixed cost per month $ 256,000

The product sells for $52 per unit. Production and sales data for July and August, the first two months of operations, follow:

Units Produced Units Sold
July 21,000 17,000
August 21,000 25,000

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

July August
Sales $ 884,000 $ 1,300,000
Cost of goods sold 357,000 525,000
Gross margin 527,000 775,000
Selling and administrative expenses 206,000 222,000
Net operating income $ 321,000 $ 553,000

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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