The product sells for $60 per unit. Production and sales data for July and August, the first two months of operations, follow:

	Units Produced	Units Sold
July	17,500	15,000
August	17,500	20,000

The companys Accounting Department has prepared the following absorption costing income statements for July and August:

	July			August
Sales	$	900,000		$	1,200,000
Cost of goods sold		600,000			800,000
Gross margin		300,000			400,000
Selling and administrative expenses		290,000			305,000
Net operating income	$	10,000		$	95,000

Required:

1. Determine the unit product cost under:

a. Absorption costing.

b. Variable costing.

2. Prepare contribution format variable costing income statements for July and August.

3. Reconcile the variable costing and absorption costing net operating incomes.