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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 customers ear. Cost data for the product follow:

Variable costs per unit:
Direct materials	$	12
Direct labour		18
Variable factory overhead		7
Variable selling and administrative		5
Total variable costs per unit	$	42
Fixed costs per month:
Fixed manufacturing overhead	$	162,000
Fixed selling and administrative		145,800
Total fixed cost per month	$	307,800
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 Units Sold May 16,200 13,600 June 16,200 18,800 Income statements prepared by the Accounting Department using absorption costing are presented below: May June Sales $ 870,400 $ 1,203,200 Cost of goods sold: Beginning inventory 0 122,200 Add cost of goods manufactured 761,400 761,400 Goods available for sale 761,400 883,600 Less ending inventory 122,200 0 Cost of goods sold 639,200 883,600 Gross margin 231,200 319,600 Selling and administrative expenses 213,800 239,800 Operating income $ 17,400 $ 79,800 Determine the unit product cost under each of the following methods. a. Absorption costing b. Variable coasting 2. Prepare variable costing income statements for May and June using the contribution approach. May June Sales variable expenses: Variable cost of goods: 1. 2 3 4 5 6 Total variable expenses 7 Fixed expenses 8 9 Total fixed expenses Operating income(loss)

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