Problem 7-22 Variable Costing Income Statements; Income Reconciliation [LO7-1, LO7-2, LO7-3]
Denton Company manufactures and sells a single product. Cost data for the product are given:
|Variable costs per unit:|
|Variable manufacturing overhead||2|
|Variable selling and administrative||2|
|Total variable cost per unit||$||19|
|Fixed costs per month:|
|Fixed manufacturing overhead||$||120,000|
|Fixed selling and administrative||172,000|
|Total fixed cost per month||$||292,000|
The product sells for $48 per unit. Production and sales data for July and August, the first two months of operations, follow:
The company’s Accounting Department has prepared the following absorption costing income statements for July and August:
|Cost of goods sold||440,000||616,000|
|Selling and administrative expenses||212,000||228,000|
|Net operating income||$||308,000||$||500,000|
1. Determine the unit product cost under:
a. Absorption costing.
b. Variable costing.
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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