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 663,600 663,600 100,000 562,800 241,200 240,800 $ 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.) June May 804,000 $ $ 1,092,000 0 0 0 0 Sales Variable expenses Variable cost of goods sold: Beginning inventory Add: Variable production costs Goods available for sale Less: Ending inventory Variable cost of goods sold Variable selling and administrative Total variable expenses Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative Total fixed expenses Operating income (loss) 0 1,092,000 804,000 0 1,092,000 $ 804,000 $ 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 $ 0 $ 0