Question

Denton Company manufactures and sells a single product. Cost data for the product are given: بیا بیا بیا 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 $ 19 $ 135,000 169,000 $ 304,000 The product sells for $45 per unit. Production and sales data for July and August, the first two months of operations, follow: Units Produced 27,000 27,000 Units Sold 23,000 31,000 July August 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 Net operating income July $1,035,000 483,000 552,000 238,000 $ 314,000 August $1,395,000 651,000 744,000 262,000 $ 482,000 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. Complete this question by entering your answers in the tabs below.

Answer 1

Requirement:1 a,b Unit product cost Direct Material Direct Labour Variable Manufacturing Overhead Fixed Manufacturing Over head Unit Cost Absorption 3.00 10.00 3.00 5.00 21.00 Variable 3.00 10.00 3.00 16.00

Requirement:2 Denton Company Variable Costing Income Statement July Sales ( @45Per unit) 1035000 Variable Expense: Variable cost of goods sold (@16) 368000 Variable Selling and Administrative Expense (@3) 69000 August 1395000 496000 93000 437000 598000 589000 806000 Total Varible Expenses Contribution Magin Fixed Expenses : Fixed manufacturing Overheads Fixed Selling and Administrative Expenses 135000 169000 135000 169000 Total fixed Expenses Net Operating Income or loss 304000 294000 304000 502000

Requirement:3 Reconcile the variable costing and absorption costing Net income July August Variable Costing Net Operating Income (loss) 294000 502000 Add(Deduct) Fixed Manufacturing Overheads cost Deferred in (released From) inventory 20,000 -20000 Absorption Costing Net Operating Income or loss 314000 482000