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 20 Variable factory overhead 6 Variable selling and administrative 6 Total variable costs per unit $ 44 Fixed costs per month: Fixed manufacturing overhead $ 191,400 Fixed selling and administrative 121,800 Total fixed cost per month $ 313,200 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 Units Sold May 17,400 14,200 June 17,400 20,600 Income statements prepared by the Accounting Department using absorption costing are presented below: May June Sales $ 908,800 $ 1,318,400 Cost of goods sold: Beginning inventory 0 156,800 Add cost of goods manufactured 852,600 852,600 Goods available for sale 852,600 1,009,400 Less ending inventory 156,800 0 Cost of goods sold 695,800 1,009,400 Gross margin 213,000 309,000 Selling and administrative expenses 207,000 245,400 Operating income $ 6,000 \ $ 63,600 Required:

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.)

	May	June
Variable expenses:
Variable cost of goods sold:
	0	0
	0	0
Total variable expenses	0	0
	0	0
Fixed expenses:
Total fixed expenses	0	0
Operating income (loss)	$0	$0

3. Reconcile the variable costing and absorption costing operating income figures.

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