Question 21: Denton Company manufactures and sells a single product. Cost data for the product are given below:

Variable costs per unit:
Direct materials		$5
Direct labor		11
Variable manufacturing overhead		3
Variable selling and administrative		2
Total variable costs per unit		$21
Fixed costs per month:
Fixed manufacturing overhead	$	45,000
Fixed selling and administrative		163,000
Total fixed cost per month	$	208,000

The product sells for $53 per unit. Production and sales data for July and August, the first two months of operations, are as follows:

	Units Produced	Units Sold
July	15,000	11,000
August	15,000	19,000

The companys Accounting Department has prepared absorption costing income statements for July and August as presented below:

	July		August
Sales	$	583,000	$	1,007,000
Cost of goods sold		242,000		418,000
Gross margin		341,000		589,000
Selling and administrative expenses		185,000		201,000
Net operating income	$	156,000	$	388,000

Required:

1.	Determine the unit product cost under absorption costing and variable costing.

2.	Prepare contribution format variable costing income statements for July and August.

3.	Reconcile the variable costing and absorption costing net operating income.