Question

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 $ 3
Direct labor 9
Variable manufacturing overhead 4
Variable selling and administrative 1
Total variable cost per unit $ 17
Fixed costs per month:
Fixed manufacturing overhead $ 108,000
Fixed selling and administrative 166,000
Total fixed cost per month $ 274,000

The product sells for $53 per unit. Production and sales data for July and August, the first two months of operations, follow:

Units
Produced
Units
Sold
July 27,000 23,000
August 27,000 31,000

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

July August
Sales $ 1,219,000 $ 1,643,000
Cost of goods sold 460,000 620,000
Gross margin 759,000 1,023,000
Selling and administrative expenses 189,000 197,000
Net operating income $ 570,000 $ 826,000

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

Denton Company
Variable Costing Income Statement
July August
Net operating income (loss)

Homework Answers

Answer #1
July August
Sales 1219000 1643000
Variable expenses:
Variable cost of goods sold 368000 496000
Variable selling and administrative expenses 23000 31000
Total Variable expenses 391000 527000
Contribution margin 828000 1116000
Fixed expenses:
Fixed manufacturing overhead 108000 108000
Fixed selling and administrative expenses 166000 166000
Total Fixed expenses 274000 274000
Net operating income(loss) 554000 842000
Calculation:
Unit product cost = 3+9+4 = $16
Variable cost of goods sold:
July = 23000*16 = $368000
August = 31000*16 = $496000
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