80.2K

Verified Solution

Link Copied!

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 7 17 11 7 Total variable costs per unit $ 42 Fixed costs per month: Fixed manufacturing overhead Fixed selling and administrative $ 252,000 168,000 Total fixed cost per month $420,000 The product sells for $64 per unit. Production and sales data for May and June, the first two months of operations, are as follows: Units Produced 21,000 21,000 May June Units Sold 16,000 26,000 Income statements prepared by the Accounting Department using absorption costing are presented below: May Sales June $1,024,000 $1,664,000 Cost of goods sold: Beginning inventory Add cost of goods manufactured 0 987,000 235,000 987,000 Goods available for sale Less ending inventory 987,000 235,000 1, 222,000 0 Cost of goods sold 752,000 1, 222,000 Gross margin Selling and administrative expenses 272,000 280,000 442,000 350,000 Operating income $ (8,000)) $ 92,000 Required: 1. Determine the unit product cost under each of the following methods. a. Absorption costing b. Variable costing $ $ 47 35 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 $ 1,024,000 $ 1,664,000 Sales Variable expenses: Variable cost of goods sold: Fixed selling and administrative 0 0 0 0 Total variable expenses 0 0 1,024,000 1,664,000 Fixed expenses: 0 Total fixed expenses Operating income (loss) $ 1,024,000 $ 1,664,000 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: 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 $ 0 $ 0

Answer & Explanation Solved by verified expert

See Answer