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. 15 21 Variable costs per unit: Direct materials Direct Labour Variable factory overhead Variable selling and administrative Total variable conta per unit 7 $ 51 Fixed costa per month Tixed manufacturing overhead Tixed selling and administrative Total fixed cost per month $170,000 187,000 $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 17,000 17,000 May June Unit Sold 14,000 20,000 Income statements prepared by the Accounting Department using absorption costing are presented below. May June $1,036,000 $1,450,000 Sales Coat of goods soldi Beginning inventory Add cont of goods manufactured 918,000 162,000 918.000 Goods available for sale Loss ending inventory $18,000 162,000 1,000,000 0 Coat of goods sold 756,000 1.000.000 Income statements prepared by the Accounting Department using absorption costing are presented below. Sales Hay $1,036,000 $1,480,000 Cost of goods sold: Beginning inventory Add cost of goods manufactured 918,000 162,000 918,000 Goods available for sale Less ending inventory Cost of goods sold 918,000 162,000 1,080,000 0 756,000 1,080,000 Gross margin Selling and administrative expenses 280,000 285,000 400,000 327,000 Operating income $ (5,000)) $ 73,000 Required: 1. Determine the unit product cost under each of the following methods. 54 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 wherever It is required.) May June $ 1,036,000 5 1,480,000 0 0 0 0 Sales Variable expenses Variable cost of goods sold: Beginning inventory Add: Variable production costs Goods available for sale Less Ending inventory Variable cost of goods sold Variable selling and administrative Tetil variable expenses Contribution margin Fixed expenses Fixed manufacturing overhead Fixed selling and administrative Total fixed expenses operating incoma (lost) 0 0 1,036,000 1,480,000 0 0 $ 1,036,000 $ 1,450,000 Fixed selling and administrative Total faced expenses Operating income (loss) 0 0 $ 1,036,000 $ 1,480,000 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: Fixed manufacturing overhead cost deferred in inventory under absorption costing Deduct: Fixed manufacturing overhead cost released from inventory under absorption costing Absorption costing operating income $ $ 0 4. Not available in Connect MacBook Air
