Audiophonics Limited manufactures and sells high-quality and durable ear buds for use with personal electronics that...

Transcribed Image Text:

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 Total variable costs per unit Fixed manufacturing overhead Fixed costs per month: Fixed selling and administrative Total fixed cost per month $ 10 19 5 5 $ 39 $126, 400 173, 800 $300, 200 The product sells for $60 per unit. Production and sales data for May and June, the first two months of operations, are as follows: May June Units Produced 15, 800 15, 800 Units Sold 13, 400 18, 200 Income statements prepared by the Accounting Department using absorption costing are presented below: Sales 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. May $ 804,000 June $1,092,000 0 100, 800 663, 600 663, 600 663, 600 764, 400 100, 800 0 562, 800 764, 400 241, 200 327, 600 240, 800 264, 800 $ 400 $ 62,800 3. Reconcile the variable costing and absorption costing operating income figures. (Loss amounts should be indicated with a minus sign.) Variable costing operating income (loss) Add: Cost deferred in inventory under absorption costing Deduct: Cost released from inventory under absorption costing Absorption costing operating income May June $ 0 $ 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 Total variable costs per unit Fixed manufacturing overhead Fixed costs per month: Fixed selling and administrative Total fixed cost per month $ 10 19 5 5 $ 39 $126, 400 173, 800 $300, 200 The product sells for $60 per unit. Production and sales data for May and June, the first two months of operations, are as follows: May June Units Produced 15, 800 15, 800 Units Sold 13, 400 18, 200 Income statements prepared by the Accounting Department using absorption costing are presented below: Sales 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. May $ 804,000 June $1,092,000 0 100, 800 663, 600 663, 600 663, 600 764, 400 100, 800 0 562, 800 764, 400 241, 200 327, 600 240, 800 264, 800 $ 400 $ 62,800 3. Reconcile the variable costing and absorption costing operating income figures. (Loss amounts should be indicated with a minus sign.) Variable costing operating income (loss) Add: Cost deferred in inventory under absorption costing Deduct: Cost released from inventory under absorption costing Absorption costing operating income May June $ 0 $