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 units 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 12 $ 38 $271,200 180,800 $452,000 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 22,600 22,600 Units Sold 16,800 28,400 Income statements prepared by the Accounting Department using absorption costing are presented below: Sales Cost of goods soldi Beginning inventory Add coat of goods manufactured Goods available for sale Less ending inventory Cost of goods sold Gross margin Operating incone May June $1,008,000 $1,704,000 266,800 1,039,600 1,039,600 1,039,600 1,306,400 266,800 0 772,800 1,306,400 235,200 397,600 Selling and administrative expenses 248,000 294,400 (12,000) 103,200