Denton Company manufactures and sells a single product. Cost data for the product are given:
Variable costs per unit: Direct materials $ 3 Direct labor 10 Variable manufacturing overhead 3 Variable selling and administrative 1 Total variable cost per unit $ 17 Fixed costs per month: Fixed manufacturing overhead $ 63,000 Fixed selling and administrative 160,000 Total fixed cost per month $ 223,000
The product sells for $46 per unit. Production and sales data for July and August, the first two months of operations, follow:
Units
Produced Units
Sold July 21,000 17,000 August 21,000 25,000
The companyâs Accounting Department has prepared the following absorption costing income statements for July and August:
July August Sales $ 782,000 $ 1,150,000 Cost of goods sold 323,000 475,000 Gross margin 459,000 675,000 Selling and administrative expenses 177,000 185,000 Net operating income $ 282,000 $ 490,000
Required:
1. Determine the unit product cost under:
a. Absorption costing.
b. Variable costing.
2. Prepare contribution format variable costing income statements for July and August.
3. Reconcile the variable costing and absorption costing net operating incomes.
Denton Company manufactures and sells a single product. Cost data for the product are given:
| Variable costs per unit: | ||||
| Direct materials | $ | 3 | ||
| Direct labor | 10 | |||
| Variable manufacturing overhead | 3 | |||
| Variable selling and administrative | 1 | |||
| Total variable cost per unit | $ | 17 | ||
| Fixed costs per month: | ||||
| Fixed manufacturing overhead | $ | 63,000 | ||
| Fixed selling and administrative | 160,000 | |||
| Total fixed cost per month | $ | 223,000 | ||
The product sells for $46 per unit. Production and sales data for July and August, the first two months of operations, follow:
| Units Produced | Units Sold | |
| July | 21,000 | 17,000 |
| August | 21,000 | 25,000 |
The companyâs Accounting Department has prepared the following absorption costing income statements for July and August:
| July | August | ||||
| Sales | $ | 782,000 | $ | 1,150,000 | |
| Cost of goods sold | 323,000 | 475,000 | |||
| Gross margin | 459,000 | 675,000 | |||
| Selling and administrative expenses | 177,000 | 185,000 | |||
| Net operating income | $ | 282,000 | $ | 490,000 | |
Required:
1. Determine the unit product cost under:
a. Absorption costing.
b. Variable costing.
2. Prepare contribution format variable costing income statements for July and August.
3. Reconcile the variable costing and absorption costing net operating incomes.
Related questions
Denton Company manufactures and sells a single product. Costdata for the product are given:
| Variable costs per unit: | ||||
| Direct materials | $ | 5 | ||
| Direct labor | 10 | |||
| Variable manufacturingoverhead | 2 | |||
| Variable selling andadministrative | 3 | |||
| Total variable cost perunit | $ | 20 | ||
| Fixed costs per month: | ||||
| Fixed manufacturingoverhead | $ | 90,000 | ||
| Fixed selling andadministrative | 166,000 | |||
| Total fixed cost per month | $ | 256,000 | ||
The product sells for $47 per unit. Production and sales datafor July and August, the first two months of operations,follow:
| Units Produced | Units Sold | |
| July | 18,000 | 14,000 |
| August | 18,000 | 22,000 |
The companyâs Accounting Department has prepared the followingabsorption costing income statements for July and August:
| July | August | ||||
| Sales | $ | 658,000 | $ | 1,034,000 | |
| Cost of goods sold | 308,000 | 484,000 | |||
| Gross margin | 350,000 | 550,000 | |||
| Selling and administrativeexpenses | 208,000 | 232,000 | |||
| Net operating income | $ | 142,000 | $ | 318,000 | |
Required:
1. Determine the unit product cost under:
a. Absorption costing.
b. Variable costing.
2. Prepare contribution format variable costing incomestatements for July and August.
3. Reconcile the variable costing and absorption costing netoperating incomes.
