Denton Company manufactures and sells a single product

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Denton Company manufactures and sells a single product.
Cost data for the product are given below:
Variable costs per unit:
Direct materials $7
Direct labor 10
Variable manufacturing overhead 5
Variable selling and administrative 3
Total variable cost per unit $25

Fixed costs per month:
Fixed manufacturing overhead $ 315,000
Fixed selling and administrative 245,000
Total fixed cost per month $ 560,000
The product sells for $60 per unit.

Production and sales data for July and August, the first two months of operations, follow:
Units Produced Units Sold
July 17,500 15,000
August 17,500 20,000

The company’s Accounting Department has prepared absorption costing income statements for July and August as presented below:
July August
Sales $900,000 $1,200,000    
Cost of goods sold                                     600,000   800,000     
Gross margin                                             300,000   400,000    
Selling and administrative expenses 290,000   305,000     
Net operating income $10,000 $95,000   

1. Determine the unit product cost under absorption costing and variable costing.
Absorption costing:
Variable Costing:

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

Reconcile the variable costing and absorption costing net operating income figures.
July August
Variable costing net operating income (loss)
Add/Deduct fixed manufacturing overhead cost deferred in/released from
inventory under absorption costing
Absorption costing net operating income/loss