*** Diego Company manufactures one product that is sold for $76 per unit. The following information pertains to the companys first year of operations in which it produced 47,000 units and sold 42,000 units.

Variable costs per unit:
Manufacturing:
Direct materials	$	26
Direct labour	$	10
Variable manufacturing overhead	$	2
Variable selling and administrative	$	4
Fixed costs per year:
Fixed manufacturing overhead	$	987,000
Fixed selling and administrative expenses	$	475,000

*** 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	$	8
Direct labour		14
Variable factory overhead		5
Variable selling and administrative		7
Total variable costs per unit	$	34
Fixed costs per month:
Fixed manufacturing overhead	$	149,400
Fixed selling and administrative		132,800
Total fixed cost per month	$	282,200

The product sells for $52 per unit. Production and sales data for May and June, the first two months of operations, are as follows:

	Units Produced	Units Sold
May	16,600	13,800
June	16,600	19,400

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

	May			June
Sales	$	717,600		$	1,008,800
Cost of goods sold:
Beginning inventory		0			100,800
Add cost of goods manufactured		597,600			597,600
Goods available for sale		597,600			698,400
Less ending inventory		100,800			0
Cost of goods sold		496,800			698,400
Gross margin		220,800			310,400
Selling and administrative expenses		229,400			268,600
Operating income	$	(8,600)		$	41,800

6. What is the company's net operating income (loss) under absorption costing? 7. What is the amount of the difference between the variable costing and absorption costing net operating incomes (losses)? 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.)