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 3 Variable selling and administrative 2 Total variable cost per unit $ 19 Fixed costs per month: Fixed manufacturing overhead $ 144,000 Fixed selling and administrative 169,000 Total fixed cost per month $ 313,000 The product sells for $50 per unit. Production and sales data for July and August, the first two months of operations, follow: Units Produced Units Sold July 24,000 20,000 August 24,000 28,000 The company’s Accounting Department has prepared the following absorption costing income statements for July and August: July August Sales $ 1,000,000 $ 1,400,000 Cost of goods sold 460,000 644,000 Gross margin 540,000 756,000 Selling and administrative expenses 209,000 225,000 Net operating income $ 331,000 $ 531,000 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.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 2PB: The following product costs are available for Kellee Company on the production of eyeglass frames:...

See similar textbooks

Related questions

Concept explainers

Topic Video

Question

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				3
Variable selling and administrative				2
Total variable cost per unit			$	19
Fixed costs per month:
Fixed manufacturing overhead	$	144,000
Fixed selling and administrative		169,000
Total fixed cost per month	$	313,000

The product sells for $50 per unit. Production and sales data for July and August, the first two months of operations, follow:

	Units Produced	Units Sold
July	24,000	20,000
August	24,000	28,000

The company’s Accounting Department has prepared the following absorption costing income statements for July and August:

	July		August
Sales	$	1,000,000		$	1,400,000
Cost of goods sold		460,000			644,000
Gross margin		540,000			756,000
Selling and administrative expenses		209,000			225,000
Net operating income	$	331,000		$	531,000

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.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions