Audiophonics Limited manufactures and sells high-quality and durable ear buds for use with personal electronics that are custom moulded to each customers ear. Cost data for the product follow:

Variable costs per unit:
Direct materials	$	12
Direct labour		17
Variable factory overhead		7
Variable selling and administrative		6
Total variable costs per unit	$	42
Fixed costs per month:
Fixed manufacturing overhead	$	235,400
Fixed selling and administrative		214,000
Total fixed cost per month	$	449,400

The product sells for $65 per unit. Production and sales data for May and June, the first two months of operations, are as follows:

	Units Produced	Units Sold
May	21,400	16,200
June	21,400	26,600

Income statements prepared by the Accounting Department using absorption costing are presented below:

	May			June
Sales	$	1,053,000		$	1,729,000
Cost of goods sold:
Beginning inventory		0			244,400
Add cost of goods manufactured		1,005,800			1,005,800
Goods available for sale		1,005,800			1,250,200
Less ending inventory		244,400			0
Cost of goods sold		761,400			1,250,200
Gross margin		291,600			478,800
Selling and administrative expenses		311,200			373,600
Operating income	$	(19,600	)	$	105,200

2. Prepare variable costing income statements for May and June using the contribution approach. (Do not leave any empty spaces; input a O wherever it is required.) May $ 1,053,000 June $ 1,729,000 0 Sales Variable expenses: Variable cost of goods sold: Beginning inventory Add: Variable production costs Goods available for sale Less: Ending inventory Variable production costs Variable production costs Total variable expenses Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative Total fixed expenses Operating income (loss) 1,053,000 1,729,000 235,400 214,000 449,400 603,600 235,400 214,000 449,400 $ 1,279,600 $