Question
2. Audiophonics Limited manufactures and sells high-quality and durable ear buds for use with personal electronics that are custom moulded to each customer's ear. Cost
2. Audiophonics Limited manufactures and sells high-quality and durable ear buds for use with personal electronics that are custom moulded to each customer's ear. Cost data for the product follow: 20 Variable costs per unit: points Direct materials Direct labour 9 $ 19 Variable factory overhead Variable selling and administrative 7 Total variable costs per unit 40 $ eBook Fixed costs per month: Fixed manufacturing overhead $ 195,800 124,600 Fixed selling and administrative Total fixed cost per month $ 320,400 The product sells for $59 per unit. Production and sales data for May and June, the first two months of operations, are as follows: Units Sold Units Produced May June 17,800 17,800 14,400 21,200 Income statements prepared by the Accounting Department using absorption costing are presented below: Sales $ 849,600 $ 1,250,800 Cost of goods sold: Beginning inventory 156,400 Add cost of goods manufactured 818,800 818,800 Goods available for sale 20 975,200 818,800 Less ending inventory Cost of goods sold points 156,400 662,400 275,600 975,200 Gross margin 187, 200 Selling and administrative expenses 196,600 230,600 Operating income $ (9,400) $ 45,000 eBook Required: 1. Determine the unit product cost under each of the following methods. a Absorption costing b. Variable costing 2. Prepare variable costing income statements for May and June using the contribution approach. (Do not leave any empty spaces; input a 0 wherever it is required.) May June Variable expenses: Variable cost of goods sold: Total variable expenses 0 0 0 0 Fixed expenses: eBook Total fixed expenses 0 0 Operating income (loss) 10 3. Reconcile the variable costing and absorption costing operating income figures. (Loss amounts should be indicated with a minus: sign.) May June Variable costing operating income (loss) Add: Cost deferred in inventory under absorption costing Deduct: Cost released from inventory under absorption costing Absorption costing operating income $ S 0 $ 0
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