Denton Company manufactures and sells a single product. Cost data for the product are given: Variable…

Denton Company manufactures and sells a single product. Cost
data for the product are given:

Variable costs per unit:

Direct materials

$
4

Direct labor

11

Variable manufacturing overhead

3

Variable selling and administrative

1

Total variable cost per unit

$
19

Fixed costs per month:

Fixed manufacturing overhead
$
90,000

Fixed selling and administrative

163,000

Total fixed cost per month
$
253,000

The product sells for $55 per unit. Production and sales data
for July and August, the first two months of operations,
follow:

Units

Produced
Units

Sold

July
15,000
11,000

August
15,000
19,000

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

July

August

Sales
$
605,000

$
1,045,000

Cost of goods sold

264,000

456,000

Gross margin

341,000

589,000

Selling and administrative expenses

174,000

182,000

Net operating income
$
167,000

$
407,000

2. Prepare variable costing income statements for July and
August.
3. Reconcile the variable costing and absorption costing net
operating incomes.

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