ACC2233 Hand-In Assignment 7 v3 QUESTION ONE Absorption and Variable Costing Prepare and Reconcile Variable costing Statements Audiophonics Lmted manudectures and sels high quality and durable ear buds for use wth personal electronica thaE are austom mouided to each oustomer's ear, Cost data fon the product folows Vaiable costs per unit Drect maerias ect labour Ve oy overhead Total variable oosts per unt $12 24 8 dministrative Fed costs per month Fed see verhead Tetal faed coss per month $240,000 inistrative 429.809 The product sels for $80 per unt Production and sales date for May and June the first of operations, ane as follow Units Produced Units Sold May June 15,000 15,000 13,000 17,000 Income statements prepared by the Accounting Depatment using absorption costing ane presented below May June Sales Cost of goods sold $1300 000 $1,040 000 Beginning inventory Add cost of goods manufachured Goods available for sale Less ending inventory 120,000 200,000 900.0004 120.000 Z80.000 900.002 020 000 Cost of goods sold Goss Seling and administrative expenses Operasing income 1.020.000 282000 $58.000 258.000 $2.000 REQUIRED 1. Detemine the unt cost under a Absorption costing b Vaiable costing 2. Prepare variable costing income statements for May and June using the contribution approach Reconcile the variable costing and absorption costing operating income figures 3 4 The company's Accounting Department has determined the break-even point to be 14,000 units per month, computed as follows 14.000 units Exed cost per month Unit contribution margin $420,000 $30 per unit On receiving this figure, the president commented, "There's something peculiar troler savs that the break-trven coint is 14.000 units pe here toid only 13 000 unts in May, and the income statement we received showed a $2.000 proft Which figure do we beleve? Prepare a brief explanation of what happened on the May income statement