FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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.
Transcribed Image Text:Denton Company manufactures and sells a single product. Cost data for the product are given:
Variable costs per unit:
Direct materials
Direct labor
Variable manufacturing overhead
Variable selling and administrative
Total variable cost per unit
Fixed costs per month:
Fixed manufacturing overhead
Fixed selling and administrative
Total fixed cost per month
Units
Produced
24,000
24,000
The product sells for $45 per unit. Production and sales data for July and August, the first two months of operations, follow:
$6
9
2
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating income
2
$19
$ 96,000
169,000
$ 265,000
Units Sold
20,000,
28,000
July
August
The company's Accounting Department has prepared the following absorption costing income statements for July and August
July
$ 900,000
420,000
480,000
209,000
$ 271,000
August
$1,260,000
588,000
672,000
225,000
$ 447,000
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