Problem 6 22 (Static) 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 $ 7 Direct labor 10 Variable manufacturing overhead 5 Variable selling and administrative 3 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 companys Accounting Department has prepared the following absorption costing income statements for July and August 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 Required 1 Required 2 Required 3 Determine the unit product cost under (a) Absorption costing, (b) Variable costing Unit Product Cost a Absorption costing b Variable costing Prepare variable costing income statements for July and August Denton Company Variable Costing Income Statement July August Net operating income (loss) Required 2 Reconcile the variable costing and absorption costing net operating incomes (Enter any losses or deductions as a negative value ) Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes July August Variable costing net operating income (loss) Add (deduct) fixed manufacturing overhead cost deferred in (released from) inventory under absorption costing Absorption costing net operating income (loss)

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Problem 6-22 (Static) 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

Problem 6-22 (Static) 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			$	7
Direct labor				10
Variable manufacturing overhead				5
Variable selling and administrative				3
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 companys Accounting Department has prepared the following absorption costing income statements for July and August:

	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.

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Required 1 Required 2 Required 3 Determine the unit product cost under: (a) Absorption costing, (b) Variable costing. Unit Product Cost a. Absorption costing b. Variable costing Prepare variable costing income statements for July and August. Denton Company Variable Costing Income Statement July August Net operating income (loss) Required 2 Reconcile the variable costing and absorption costing net operating incomes. (Enter any losses or deductions as a negative value.) Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes July August Variable costing net operating income (loss) Add (deduct) fixed manufacturing overhead cost deferred in (released from) inventory under absorption costing Absorption costing net operating income (loss)