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PROBLEM 6-22 Variable Costing Income Statements; Income Reconciliation ( LO6-1, 9 LO6-2, 2 LOG-3 Denton Company manufactures and sells a single product. Cost data for the product are given: Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Total variable cost per unit $25 Fixed costs per month: Fixed manufacturing overhead $315,000 Fixed selling and administrative 245,000 Total fixed cost per month $560,000 The product sells for $60 per unit. Production and sales data for July and August, the first two months of operations, follow: Units Produced Units Sold July 17,500 15,000 August 17,500 20,000 The company's Accounting Department prepared the following absorption costing income statements for July and August: Page 291 July August Sales $900,000 $1,200,000 Cost of goods sold 600,000 800,000 Gross margin 300,000 400,000 Selling and administrative expenses 290,000 305,000 Net operating income- 10,000 95,000 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. 4. The Accounting Department determined the company's break even point is 16,000 units per month, computed as follows: Fixed cost per month $560, 000 Unit contribution margin $35 per unit if = 16, 000 units ."I'm confused," said the president. "The accountants say our break-even point is 16,000 units per month, but we sold only 15,000 units in July, and the income statement they prepared shows a $10,000 profit for that month. Either the income statement is wrong or the break- even point is wrong." Prepare a brief memo for the president, explaining what happened on the July absorption costing income statement