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	$	12
Direct labour		17
Variable factory overhead		5
Variable selling and administrative		4
Total variable costs per unit	$	38
Fixed costs per month:
Fixed manufacturing overhead	$	271,200
Fixed selling and administrative		180,800
Total fixed cost per month	$	452,000

The product sells for $60 per unit. Production and sales data for May and June, the first two months of operations, are as follows:

	Units Produced	Units Sold
May	22,600	16,800
June	22,600	28,400

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

	May			June
Sales	$	1,008,000		$	1,704,000
Cost of goods sold:
Beginning inventory		0			266,800
Add cost of goods manufactured		1,039,600			1,039,600
Goods available for sale		1,039,600			1,306,400
Less ending inventory		266,800			0
Cost of goods sold		772,800			1,306,400
Gross margin		235,200			397,600
Selling and administrative expenses		248,000			294,400
Operating income	$	(12,800)		$	103,200

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.)

4. This part of the question is not part of your Connect assignment.

Prev

Question 12 of 12 Total12 of 12

Visit question mapThis is the last question in the assignment. To submit, use Alt + S. To access other questions, proceed to the question map button.Next