Direct Marvel Inc. is evaluating one of the product lines that they sell to the RCMP$.$ The company produces an identical number of units monthly; however, the sales of units differ each month.

Product B

Selling price

$$109$

Units in beginning inventory

$360$

Units produced

$6900$

Units sold

$7200$

Variable costs per unit:

Direct materials

$$29$

Direct labour

$$31$

Variable manufacturing overhead

$$2$

Variable selling and administrative costs

$$7$

Fixed costs:

Fixed manufacturing overhead

$$53,500$

Fixed selling and administrative costs

$$145,000$

Using the table above, perform the following tasks:

Calculate the contribution margin.

Determine the operating income under variable costing.

Using your answer from the previous question, create a reconciliation for it to operating income under absorption costing.

i$.$ Demonstrate the differences between each approach.