How do you find variable cost of goods sold and variable selling and administrative expenses for...

How do you find variable cost of goods sold and variable selling and administrative expenses for both months in the income statement in Required 2?

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				4
Variable selling and administrative				2
Total variable cost per unit			$	21
Fixed costs per month:
Fixed manufacturing overhead	$	120,000
Fixed selling and administrative		163,000
Total fixed cost per month	$	283,000

The product sells for $48 per unit. Production and sales data for July and August, the first two months of operations, follow:

	Units Produced	Units Sold
July	24,000	20,000
August	24,000	28,000

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

	July		August
Sales	$	960,000	$	1,344,000
Cost of goods sold		480,000		672,000
Gross margin		480,000		672,000
Selling and administrative expenses		203,000		219,000
Net operating income	$	277,000	$	453,000

Required:

1. Determine the unit product cost under:

a. Absorption costing.

b. Variable costing.

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

3. Reconcile the variable costing and absorption costing net operating incomes.

Solutions

Expert Solution

ekkarill92 answered 1 year ago

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