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Denton Company manufactures and sells a single product. Cost data for the product are given: $ 6 NWN 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 $ 23 $ 150,000 163,000 $ 313,000 The product sells for $52 per unit. Production and sales data for July and August, the first two months of operations, follow: HITS July August Units Produced 30,000 30,000 Units Sold 26,000 34,000 The company's Accounting Department has prepared the following absorption costing income statements for July and August: Sales Cost of goods sold Gross margin Selling and administrative expenses July $1,352,000 676,000 676,000 215,000 August $ 1,768,000 884,000 884,000 231,000

Answer 1

Unit Product cost $ 26 a. Absorption I Variable Costing Costing b. $21 Calculation? Absorption Costing Variable Costing $ 6 & 12 $ 12 Direct materials Direct labor Variable manufacturing overhead fixed manufacturing overhead Unit Product cost $ 3 & 5 $ 26 $21 fixed manufacturing overhead & = $ 150,000 - 30,000 units $5

(2) Denton Company Vouable Costing Income Statement July August Sales $1,352,000 $1,768,000 Variable expenses : Variable cost of goods sold & 546,000 $ 714,000 Variable selling and administratives $ 52,000 $ 68,000 Total variable expenses Contribution margin $ 598,000 $754,000 + 782,000 $986,000 fixed expenses fixed manufacturing overhead fixed selling and administicative expenses $ 150,000 # 163,500 $150,000 $ 163,000 $ 313,000 $ 4241,000 $ 313,000 & 673,000 Total fixed expenses Net operating income (loss) Calculation: Variable cost of goods sold & Unit Product cost & Unit sold. July : $214 2 6,000 = $546,000 August $21 X 34,000 = $714,000 Variable selling and administrative expenses = Variable selling and administrative expenses cost per unit x Unit sold July: $2 x 26,600 = $52,000 August : $ 2 X 34,000 = $ 68,000

come! Reconciliation of variable Costing and Absorption Costing Net Operating July August Variable costing met operating income (loss) 441,000 $ 673,000 Ada (deduct fixed manufacturing overhead Cost defeared in (released from) inventory under $ 20,000 $(20,000) absorption costing Absorption costing net operating income floss) $ 461,000 $ 653,000 Calculation; Year 1 Year 2 4,000 30,000 30,000 26,000 34,000 Units in beginning inventory Add: Units produced Less: Unit sold Units in ending inventory 4,000 fixed manufacturing under absorption overhead cost deferred en inventory costing (4,000 units x $5 per unit) = $ 20,000 fixed manufacturing overhead under absorption costing from inventory & 5 per unit) cost released (4,000 units X - $ 20,000