a.

b.

c.

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: Variable costs per unit: Direct materials Direct labour Variable factory overhead Variable selling and administrative Total variable costs per unit Fixed costs per month: Fixed manufacturing overhead Fixed selling and administrative Total fixed cost per month 8 14 5 7 34 $ $149,4001 132,800 $282,200 The product sells for $52 per unit. Production and sales data for May and June, the first two months of operations, are as follows: Units Produced Units Sold May 16,680 13,800 June 16,600 19,400 Income statements prepared by the Accounting Department using absorption costing are presented below: May June $ 717,600 $1,008,800 Sales Cost of goods sold: Beginning inventory Add cost of goods manufactured Goods available for sale Less ending inventory Cost of goods sold Gross margin Selling and administrative expenses Operating income 100,800 597,600 698,400 0 597,600 597,600 100,800 496,800 220,800 229,400 $ (8,600) 698,400 310,400 268,600 41,800 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 Fixed expenses Total fed expenses Operating income (055) 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