Question : Chapter 5-4 Denton Company manufactures and sells : 3173

Chapter 5-4

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

The product sells for $46 per unit. Production and sales data for July and August, the first two months of operations, are as follows:

The company’s Accounting Department has prepared absorption costing income statements for July and August as presented below:

Required:

1. Determine the unit product cost under absorption costing and variable costing.

Unit Product Cost-a.Absorption costing -b.Variable costing

2. Prepare contribution format variable costing income statements for July and August.

Denton CompanyVariable Costing Income StatementJulyAugustVariable expenses:Total variable expensesFixed expenses:Total fixed expensesNet operating income (loss)

3. Reconcile the variable costing and absorption costing net operating income (loss) figures.

Reconciliation of Variable Costing and Absorption Costing Net Operating IncomesJulyAugustVariable costing net operating income (loss)Add (deduct) fixed manufacturing overhead cost deferred in (released from) inventory under absorption costingAbsorption costing net operating income (loss)

Variable costs per unit:
Direct materials	$	6
Direct labor		10
Variable manufacturing overhead		3
Variable selling and administrative		2
Total variable cost per unit	$	21
Fixed costs per month:
Fixed manufacturing overhead	$	96,000
Fixed selling and administrative		175,000
Total fixed cost per month	$	271,000