Problem 7-14

Delton company manufactured and sales single product-

Variable cost per unit

Direct material 7
Direct labor 10
Variable manufacturing overhead 5
Variable selling and administrative 3
expense
Fixed cost per month
Fixed manufacturing overhead 315000
Fixed selling and administrative expense 245000

The product sells for 60 per unit. Production and sales data for July and August for the first two months
of operations are as follows-

Units produced Units sold

July 17500 15000
August 17500 20000

Required:

1. Determine unit product cost under absorption and variable costing

2. Prepare income statements for July and August using the contribution approach and regular
approach.
3. Reconcile the variable costing and absorption costing NOI figures