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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
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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