Denton Company manufactures and sells a single product. Cost data for the product are given: 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

Required:
Determine the unit product cost under:

1. Absorption costing.
2. Variable costing.
3. Prepare contribution format variable costing income statements for July and August.
4. Reconcile the variable costing and absorption costing net operating income figures.