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 $ 7 Direct labour 19 Variable factory overhead 7 Variable selling and administrative 3 Total variable costs per unit $ 36 Fixed costs per month: Fixed manufacturing overhead $ 167,400 Fixed selling and administrative 130,200 Total fixed cost per month $ 297,600 The product sells for $54 per unit. Production and sales data for May and June, the first two months of operations, are as follows: Units Produced Units Sold May 18,600 14,800 June 18,600 22,400 Income statements prepared by the Accounting Department using absorption costing are presented below: May June Sales $ 799,200 $ 1,209,600 Cost of goods sold: Beginning inventory 0 159,600 Add cost of goods manufactured 781,200 781,200 Goods available for sale 781,200 940,800 Less ending inventory 159,600 0 Cost of goods sold 621,600 940,800 Gross margin 177,600 268,800 Selling and administrative expenses 174,600 197,400 Operating income $ 3,000 \ $ 71,400

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 7 19 7 3 Total variable costs per unit $ 36 Fixed costs per month: Fixed manufacturing overhead Fixed selling and administrative $167,400 130,200 Total fixed cost per month $297,600 The product sells for $54 per unit. Production and sales data for May and June, the first two months of operations, are as follows: Units Produced 18,600 18,600 May June Units Sold 14,800 22,400 Income statements prepared by the Accounting Department using absorption costing are presented below: May June $ 799,200 $1,209,600 Sales Cost of goods sold: Beginning inventory Add cost of goods manufactured 0 781,200 159,600 781,200 Goods available for sale Less ending inventory 781,200 159,600 940,800 0 Cost of goods sold 621,600 940,800 Gross margin Selling and administrative expenses 177,600 174,600 268,800 197,400 Operating income $ 3,000\$ 71,400 Required: 1. Determine the unit product cost under each of the following methods. a. 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.) May June Variable expenses: Variable cost of goods sold: 0 0 0 0 Total variable expenses 0 0 0 0 Fixed expenses: Total fixed expenses 0 Oo Operating income (loss) $ 0 $ 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: Fixed manufacturing overhead cost deferred in inventory under absorption costing Deduct: Fixed manufacturing overhead cost released from inventory under absorption costing Absorption costing operating income $ 0 $ 0