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 18 9 4 Total variable costs per unit $ 38 Fixed costs per month: Fixed manufacturing overhead Fixed selling and administrative $267,800 226,600 Total fixed cost per month $494,400 The product sells for $63 per unit. Production and sales data for May and June, the first two months of operations, are as follows: Units Produced 20,600 20,600 May June Units Sold 15,800 25,400 Income statements prepared by the Accounting Department using absorption costing are presented below: Sales May June $ 995,400 $1,600,200 Cost of goods sold: Beginning inventory Add cost of goods manufactured 968,200 225,600 968,200 Goods available for sale Less ending inventory 968,200 225,600 1,193,800 Cost of goods sold 742, 600 1,193,800 Gross margin Selling and administrative expenses 252,800 289, 800 406,400 328,200 Operating income $ (37,000)) $ 78,200 1. Determine the unit product cost under each of the following methods. 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 0 wherever it is required.) Answer is not complete. May June $ 1,600,200 Sales $ 995,400 0 225,600 0 225,600 0 225,600 X (225,600) X 225,600 Variable expenses Variable cost of goods sold: Beginning inventory Add: Variable production costs Goods available for sale Less: Ending inventory Variable production costs Variable cost of goods sold Total variable expenses Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative Total fixed expenses x (225,600) 769,800 225,600 1,374,600 0 0 $ 1,374,600 Operating income (loss) $ 769,800 3. Reconcile the variable costing and absorption costing operating income figures. (Loss amounts should be indicated with a minus sign.) X Answer is not complete. 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 $ 0