Bell Company manufactures and sells a single product. Cost data for the product follow:

Variable costs per unit:
Direct materials	$	3
Direct labor		12
Variable factory overhead		3
Variable selling and administrative		3
Total variable costs per unit	$	21
Fixed costs per month:
Fixed manufacturing overhead	$	120,000
Fixed selling and administrative		166,000
Total fixed cost per month	$	286,000

The product sells for $48 per unit. Production and sales data for May and June, the first two months of operations, are as follows:

	Units Produced	Units Sold
May	24,000	20,000
June	24,000	28,000

Income statements prepared by the accounting department, using absorption costing, are presented below:

	May		June
Sales	$	960,000	$	1,344,000
Cost of goods sold		460,000		644,000
Gross margin		500,000		700,000
Selling and administrative expenses		226,000		250,000
Net operating income	$	274,000	$	450,000

Required:

1.	Determine the unit product cost under absorption costing and variable costing.

		Unit Product Cost
Absorption costing
Variable costing

2.	Prepare contribution format variable costing income statements for May and June. (Input all amounts as positive values except losses which should be indicated by a minus sign.)

Variable Costing Income Statement
	May	June
(Click to select)SalesFixed manufacturing overheadVariable cost of goods soldNet operating income (loss)Contribution marginFixed selling and administrative expensesVariable selling and administrative expenses	$	$
Variable expenses:
(Click to select)SalesContribution marginNet operating income (loss)Variable cost of goods soldFixed selling and administrative expensesDirect materialsFixed manufacturing overhead
(Click to select)Contribution marginSalesFixed selling and administrative expensesFixed manufacturing overheadNet operating income (loss)Variable selling and administrative expensesDirect materials
Total variable expenses
(Click to select)Gross marginContribution margin
Fixed expenses:
(Click to select)Variable selling and administrative expensesFixed manufacturing overheadDirect materialsContribution marginSalesNet operating income (loss)Variable cost of goods sold
(Click to select)Fixed selling and administrative expensesVariable cost of goods soldDirect materialsVariable selling and administrative expensesNet operating income (loss)Contribution marginSales
Total fixed expenses
Net operating income (loss)	$	$

3.	Reconcile the variable costing and absorption costing net operating incomes. (Loss amounts and amounts to be deducted should be indicated with a minus sign.)

Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes
	May	June
Variable costing net operating income (loss)	$	$
Add (deduct) fixed manufacturing overhead cost deferred in (released from) inventory under absorption costing
Absorption costing net operating income (loss)	$	$