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Audiophonics Limited manufactures and sells high-quality and durable ear buds for use with personal electronics that are custom moulded to each customers ear. Cost data

Audiophonics Limited manufactures and sells high-quality and durable ear buds for use with personal electronics that are custom moulded to each customers ear. Cost data for the product follow:

Variable costs per unit:
Direct materials $ 15
Direct labour 21
Variable factory overhead 8
Variable selling and administrative 7
Total variable costs per unit $ 51
Fixed costs per month:
Fixed manufacturing overhead $ 170,000
Fixed selling and administrative 187,000
Total fixed cost per month $ 357,000

The product sells for $74 per unit. Production and sales data for May and June, the first two months of operations, are as follows:

Units Produced Units Sold
May 17,000 14,000
June 17,000 20,000

Income statements prepared by the Accounting Department using absorption costing are presented below:

May June
Sales $ 1,036,000 $ 1,480,000
Cost of goods sold:
Beginning inventory 0 162,000
Add cost of goods manufactured 918,000 918,000
Goods available for sale 918,000 1,080,000
Less ending inventory 162,000 0
Cost of goods sold 756,000 1,080,000
Gross margin 280,000 400,000
Selling and administrative expenses 285,000 327,000
Operating income $ (5,000) $ 73,000

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Required: 1. Determine the unit product cost under each of the following methods. 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.) 3. Reconcile the variable costing and absorption costing operating income figures. (Loss amounts should be indicated with a minus sign.)

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