Problem 6-22 (Algo) Variable Costing Income Statements; Income Reconciliation [LO6-1, LO6-2, LO6-3]

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

Variable costs per unit:
Direct materials	$ 4
Direct labor	10
Variable manufacturing overhead	2
Variable selling and administrative	2
Total variable cost per unit	$ 18
Fixed costs per month:
Fixed manufacturing overhead	$ 180,000
Fixed selling and administrative	172,000
Total fixed cost per month	$ 352,000

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	30,000	26,000
August	30,000	34,000

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

	July	August
Sales	$ 1,248,000	$ 1,632,000
Cost of goods sold	572,000	748,000
Gross margin	676,000	884,000
Selling and administrative expenses	224,000	240,000
Net operating income	$ 452,000	$ 644,000

Required:

1. Determine the unit product cost under:
   1. Absorption costing.
   2. Variable costing.
2. Prepare variable costing income statements for July and August.
3. Reconcile the variable costing and absorption costing net operating incomes.

Prepare variable costing income statements for July and August. Reconcile the variable costing and absorption costing net operating incomes. Note: Enter any losses or deductions as a negative value