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	$	13
Direct labour		12
Variable factory overhead		9
Variable selling and administrative		5
Total variable costs per unit	$	39
Fixed costs per month:
Fixed manufacturing overhead	$	276,000
Fixed selling and administrative		161,000
Total fixed cost per month	$	437,000

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	23,000	17,000
June	23,000	29,000

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

	May			June
Sales	$	1,020,000		$	1,740,000
Cost of goods sold:
Beginning inventory		0			276,000
Add cost of goods manufactured		1,058,000			1,058,000
Goods available for sale		1,058,000			1,334,000
Less ending inventory		276,000			0
Cost of goods sold		782,000			1,334,000
Gross margin		238,000			406,000
Selling and administrative expenses		246,000			306,000
Operating income	$	(8,000)		$	100,000

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.)