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 4 overhead Variable selling and adminiatrative 1. Total variable coat per $ 19 unit Fixed cots per month Fixed manufacturing $105,000 overhead Fixed selling and adminiatrative 169,000 Total fixed cost per month $274,000 The product sells for $52 per unit. Producttion and sales data for July and August, the first two momths of operations follow Units Units Produced Sold July August 21,000 25,000 21,000 17,000 The company's Accounting Department has prepared the following absorption costing income statements for July and August July $884,000 391,000 August $1,300,000 Sales 575,000 725,000 Cost of goods sold Groas margin Selling and adniniatrative expenaes 493,000 186,000 194,000 Net operating income $307,000 531,000 Required: 1. Determine the unit product cost under a. Absorption Costing. b. Varlable costing. 2. Prepare contribution format varlable costing income statements for. July and August 3. Reconcle 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 Variable 4.00 10.00 Direct Material Direct Labour Variable Manufacturing Overhead Fixed Manufacturing Over head Unit Cost Absorption 4.00 10.00 4.00 5.00 23.00 4.00 18.00

Requirement:2 Denton Company Variable Costing Income Statement July Sales (@52Per unit) 8840001 Variable Expense: Variable cost of goods sold (@18) 306000 Variable Selling and Administrative Expense (@1) 17000 August 1300000 450000 25000 323000 561000 475000 825000 Total Varible Expenses Contribution Magin Fixed Expenses : Fixed manufacturing Overheads Fixed Selling and Administrative Expenses 105000 169000 105000 169000 Total fixed Expenses Net Operating Income or loss 274000 287000 2740001 551000

Requirement:3 Reconcile the variable costing and absorption costing Net income July August Variable Costing Net Operating Income (loss) 2870001 551000 Add(Deduct) Fixed Manufacturing Overheads cost Deferred in (released From) inventory 20,000 -20000 Absorption Costing Net Operating Income or loss 307000 531000