Check my work Denton Company manufactures and sells a single product. Cost data
ID: 2601118 • Letter: C
Question
Check my work Denton Company manufactures and sells a single product. Cost data for the product are given Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Total variable cost per unit $ 20 Fixed costs per month: Fixed manufacturing overhead Fixed selling and administrative Total fixed cost per month 108,000 163,000 271,000 The product sells for $51 per unit. Production and sales data for July and August, the first two months of operations, follow: Units Produced 18,000 18,000 Units sold 14,000 22,000 July August The company's Accounting Department has prepared the following absorption costing income statements for July and August:Explanation / Answer
Requirement 1 Calculation of unit product costs Absorption Costing Variable Costing Direct Materials $4 $4 Direct Labour $11 $11 Variable Manufacturing overheads $3 $3 Fixed Manufacturing Overheads $6 - Unit product cost $24 $18 Fixed manufacturing overheads per unit = $108,000 / 18,000 $6 The cost of producing a single product is $24 under absorption costing and $18 under Variable costing system. Requirement 2 Variable costing Income statement July August Sales 714000 1122000 variable expenses: Beginning inventory $96,000 Production cost $432,000 $432,000 Cost of goods available for sale $432,000 $528,000 Ending inventory ($96,000) - Variable selling & administrative expenses $28,000 $44,000 Total variable expenses $364,000 $572,000 Contribution Margin $350,000 $550,000 Fixed expenses: Fixed selling and administrative expenses $163,000 $163,000 Total fixed expenses $163,000 $163,000 Net operating income (loss) $187,000 $387,000