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 14 21 7 4 Total variable costs per unit $ 46 Fixed costs per month: Fixed manufacturing over head Fixed selling and administrative $217,800 118,800 Total fixed cost per month $336,600 The product sells for $64 per unit. Production and sales data for May and June, the first two months of operations, are as follows: Units Produced 19,800 19,800 May June Units Sold 15,400 24,200 Income statements prepared by the Accounting Department using absorption costing are presented below: Sales $ May June 985,600 $1,548,800 0 1,049,400 233,200 1,049,400 Cost of goods sold: Beginning inventory Add cost of goods manufactured Goods available for sale Less ending inventory Cost of goods sold Gross margin Selling and administrative expenses Operating income 1,049,400 233,200 1,282,600 0 816, 200 1,282,600 169,400 180,400 266,200 215,600 $ (11,000)) $ 50,600 Required: 1. Determine the unit product cost under each of the following methods. $ 57 a. Absorption costing b. Variable costing $ 42 Check my work 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.) $ May June 985,000 5 1,548,800 0 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 Total variable expenses Contribution margin Fixed expenses Fixed manufacturing overtiead Fixed seting and administrative Total fixed expenses Operating income foss) 0 0 1,548,300 985.600 217800 217.800 118.800 118.800 336,600 336,600 549,000 $ 1.212.200 5 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 OS 0