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 7 17 9 4 Total variable costs per unit $ 37 Fixed costs per month Fixed manufacturing overhead Fixed selling and administrative $247,000 133,690 Total fixed cost per month $380,000 The product sells for $58 per unit. Production and sales data for May and June, the first two months of operations, are as follows: May June Units Produced 19,000 19,000 Units sold 15,000 23,000 Income statements prepared by the Accounting Department using absorption costing are presented below. Sales May June $ 870,000 $1,334,000 184,000 874,000 874,900 Cost of goods soldi Beginning inventory Add cost of goods manufactured Goods available for sale Less ending Inventory Cost of goods sold 1,058,000 874,000 184,000 690,000 1,058,000 Gross marrin Selling and administrative expenses Operating income 180,000 193,000 276,000 225,000 5 (13,000)) 51,000