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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 12 24 8 6 Total variable costs per unit 50 Fixed costs per month: Fixed manufacturing overhead Fixed selling and administrative $ 240,000 180,000 Total fixed cost per month $420,000 The product sells for $80 per unit. Production and sales data for May and June, the first two months of operations, are as follows: Units Produced 15,000 15,000 May June Units Sold 13,000 17,000 Income statements prepared by the Accounting Department using absorption costing are presented below: May June $1,040,000 $1,360,000 Sales Cost of goods sold: Beginning inventory Add cost of goods manufactured 0 900,000 120,000 900,000 Goods available for sale Less ending inventory 900,000 120,000 1,020,000 o Cost of goods sold 780,000 1,020,000 Gross margin Selling and administrative expenses 260,000 258,000 340,000 282,000 Operating income 2,000 $ 58,000 Required: 1. Determine the unit product cost under each of the following methods. $ 60 a. Absorption costing b. Variable costing $ 44 2. Prepare variable costing income statements for May and June using the contribution approach. (Do not leave any empty spaces; input a O wherever it is required.) May June Sales Variable expenses: Variable cost of goods sold: Beginning inventory Add: Variable production costs Goods available for sale Less: Ending inventory 0 0 0 0 0 78,000 78,000 (78,000) 102,000 102,000 (102,000) Variable selling and administrative Total variable expenses Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative Total fixed expenses Operating income (loss) 240,000 240,000 180,000 180,000 420,000 420,000 $ (498,000) $ (522,000)| 3. Reconcile the variable costing and absorption costing operating income figures. (Loss amounts should be indicated with a minus sign.) May June 0 Variable costing operating income (loss) Add: Fixed manufacturing overhead cost deferred in inventory under absorption costing Deduct: Fixed manufacturing overhead cost released from inventory under absorption costing Absorption costing operating income 32,000 0 $ 32,000 $