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

Variable costs per unit:
Direct materials			$	5
Direct labor				12
Variable manufacturing overhead				3
Variable selling and administrative				3
Total variable cost per unit			$	23
Fixed costs per month:
Fixed manufacturing overhead	$	120,000
Fixed selling and administrative		163,000
Total fixed cost per month	$	283,000

The product sells for $54 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 has prepared the following absorption costing income statements for July and August:

	July			August
Sales	$	1,404,000		$	1,836,000
Cost of goods sold		624,000			816,000
Gross margin		780,000			1,020,000
Selling and administrative expenses		241,000			265,000
Net operating income	$	539,000		$	755,000

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.

August Denton Company Variable Costing Income Statement July Sales 1.404.000 Variable expenses: Variable cost of goods sold 520,000 Variable selling and administrative expenses 78,000 1.836.000 680,000 102,000 598,000 806,000 782,000 1,054,000 Total variable expenses Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative expenses 120,000 163,000 120,000 163,000 Total fixed expenses Net operating income (loss) 283,000 $ 523,000 283,000 $ 771,000