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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
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 costs per month: Fixed manufacturing overhead Fixed selling and administrative Total fixed cost per month 7 14 9 7 37 $242,400 181,800 $424,200 The product sells for $61 per unit. Production and sales data for May and June, the first two months of operations, are as follows: May June Units Produced 20,200 20,200 Units Sold 15,600 24,800 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 June $951,600 $1,512,800 0 848,400 848,400 193,200 848,400 1,041,600 193,200 0 655,200 1,041,600 296,400 471,200 291,000 355,400 $ 5,400 $ 115,800 Required: 1. Determine the unit product cost under each of the following methods. a. Absorption costing b. Variable costing
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