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Audiophonics Limited manufactures and sells highquality and durable ear buds for use with personal electronics that are custom moulded to each customer's ear. Cost data

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Audiophonics Limited manufactures and sells highquality 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 5 13 Direct labour 12 Variable factory overhead 9 Variable selling and administrative 5 Total variable costs per unit $ 39 Fixed costs per month: Fixed manufacturing overhead $276,000 Fixed selling and administrative 161,000 Total fixed cost per month $437,000 The product sells for $60 per unit. Production and sales data for May and June, the first two months of operations, are as follows: Units Produced Units Sold May 23,000 17,000 June 23,000 29,000 The product sells for $60 per unit. Production and sales data for May and June, the first two months of operations, are as follows: Units Produced Units Sold May 23,000 17,000 June 23,000 29,000 Income statements prepared by the Accounting Department using absorption costing are presented below: May June Sales $1,020,000 $1,740,000 Cost of goods sold: Beginning inventory 0 276,000 Add cost of goods manufactured 1,058,000 1,058,000 Goods available for sale 1,058,000 1,334,000 Less ending inventory 276,000 0 Cost of goods sold 782,000 1,334,000 Gross margin 238,000 406,000 Selling and administrative expenses 246,000 306,000 Operating income $ (8,000) $ 100,000 I Required: 1. Determine the unit product cost under each of the following methods. .3. 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.) Operating income (loss) 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

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