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		18
Variable factory overhead		7
Variable selling and administrative		5
Total variable costs per unit	$	42
Fixed costs per month:
Fixed manufacturing overhead	$	162,000
Fixed selling and administrative		145,800
Total fixed cost per month	$	307,800

The product sells for $64 per unit. Production and sales data for May and June, the first two months of operations, are as follows:

	Units Produced	Units Sold
May	16,200	13,600
June	16,200	18,800

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

	May			June
Sales	$	870,400		$	1,203,200
Cost of goods sold:
Beginning inventory		0			122,200
Add cost of goods manufactured		761,400			761,400
Goods available for sale		761,400			883,600
Less ending inventory		122,200			0
Cost of goods sold		639,200			883,600
Gross margin		231,200			319,600
Selling and administrative expenses		213,800			239,800
Operating income	$	17,400		$	79,800

Required:

1. Determine the unit product cost under each of the following methods.

a) absorption

b) varaible 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.)

3. Reconcile the variable costing and absorption costing operating income figures. (Loss amounts should be indicated with a minus sign.)