Audiophonics Limited manufactures and sells high-quality and durable ear buds for use with personal electronics that are

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Audiophonics Limited Manufactures And Sells High Quality And Durable Ear Buds For Use With Personal Electronics That Are 1 (26.66 KiB) Viewed 348 times

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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 Total variable costs per unit Fixed costs per month: Fixed manufacturing overhead Fixed selling and administrative Total fixed cost per month 13 12 9 5 39 $ $276,000 161,000 $437,000 The product sells for $60 per unit. Production and sales data for May and June, the first two months of operations, are as follows: Units Produced 23,000 23,000 Units Sold 17,000 May June 29,000 Income statements prepared by the Accounting Department using absorption costing are presented below:

May June $1,020,000 $1,740,000 Sales Cost of goods sold: Beginning inventory Add cost of goods manufactured Goods available for sale Less ending inventory Cost of goods sold Gross margin Selling and administrative expenses Operating income 0 276,000 1,058,000 1,058,000 1,058,000 1,334,000 276,000 782,000 1,334,000 238,000 406,000 246,000 306,000 $ (8,000) $ 100,000 Required: 1. Determine the unit product cost under each of the following methods. a. Absorption costing b. Variable costing

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.) May June Variable expenses Variable cost of goods sold: 0 0 Total variable expenses 0 0 0 0 Fixed expenses Total fixed expenses Operating income (loss) $ 0 $

3. Reconcile the variable costing and absorption costing operating income figures. (Loss amounts should be indicated with a minus sign.) May June 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 $ 0 $ 0