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Problem 8-15 Prepare and Reconcile Variable Costing Statements [L01, L02, L03, L04] Audiophonics Limited manufactures and sells highquality and durable ear buds for use with
Problem 8-15 Prepare and Reconcile Variable Costing Statements [L01, L02, L03, L04] Audiophonics Limited manufactures and sells highquality 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 S 8 Direct labour 14 Variable factory overhead 5 Variable selling and administrative 7 Total variable costs per unit S 34 Fixed costs per month: Fixed manufacturing overhead $149,400 Fixed selling and administrative 132,800 Total fixed cost per month 52321200 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 i Required: 1. Determine the unit product cost under each of the following methods Absorption costing - a _ 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.) Variable expenses: _ Variable cost of goods sold: _ Total variable expenses 0 Operating' Income (loss) 3. Reconcile the variable costing and absorption costing operating income figures; (Loss amounts should be indicated with a minus sign.) Variable costing operating income (loss) Add: Cost deferred in inventory under absorption costing Deduct: Cost released from inventory under absorption costing Absorption costing operating income
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