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 10 19 5 5 39 $ $126,400 173,800 $300,200 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 15,800 15,800 Units Sold 13,400 18,200 Income statements prepared by the Accounting Department using absorption costing are presented below: May June $ 804,000 $1,092,000 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 0 663,600 663,600 100,800 562,800 241,200 240,800 400 $ 100,800 663,600 764,400 0 764,400 327,600 264,800 62,800 Required: 1. Determine the unit product cost under each of the following methods. $ 42 a. Absorption costing b. Variable costing $ 34 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.) May June Variable expenses: Variable cost of goods sold: Total variable expenses Fixed expenses: Total fixed expenses Operating income (loss) Total fixed expenses Operating income (loss) 3. Reconcile the variable costing and absorption costing operating income figures. (Loss amounts should be indicated with a minus sign.) May June 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