=+2-50 KK Absorption and variable costing OBJECTIVE 6 BioMix produces trail mix packaged for sale in convenience stores. At the beginning of April 2014, BioMix has no inventory of trail mix. Demand for the next three months is expected to remain constant at 50000 bags per month. BioMix plans to produce to demand 50000 bags in April. However, many of the employees take a holiday in June, so BioMix plans to produce 70000 bags in May and only 30000 bags in June.

Costs for the three months are expected to remain unchanged. The costs and revenues for April, May and June are expected to be:

Sales revenue $6.00 per bag Direct materials cost $0.80 per bag Direct manufacturing labour cost $0.45 per bag Variable manufacturing overhead cost $0.30 per bag Variable selling cost $0.15 per bag Fixed manufacturing overhead costs $105 000 per month Fixed administrative costs $35 000 per month Suppose the actual costs, market demand and levels of production for April, May and June are as expected.

Required 1 Calculate operating profit for April, May and June under variable costing.