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 May June 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 Units Sold 17,000 29,000 23,000 23,000 Sales Cost of goods sold: 13 12 9 5 39 Income statements prepared by the Accounting Department using absorption costing are presented below: May June $1,020,000 $1,740,000 Beginning inventory Add cost of goods manufactured Goods available for sale Less ending inventory $276,000 161,000 $437,000 Cost of goods sold Gross margin Selling and administrative expenses Operating income 0 276,000 1,058,000 1,334,000 1,058,000 1,058,000 276,000 782,000 238,000 246,000 $ (8,000) $ 0 1,334,000 406,000 306,000 100,000
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 May June 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 Units Sold 17,000 29,000 23,000 23,000 Sales Cost of goods sold: 13 12 9 5 39 Income statements prepared by the Accounting Department using absorption costing are presented below: May June $1,020,000 $1,740,000 Beginning inventory Add cost of goods manufactured Goods available for sale Less ending inventory $276,000 161,000 $437,000 Cost of goods sold Gross margin Selling and administrative expenses Operating income 0 276,000 1,058,000 1,334,000 1,058,000 1,058,000 276,000 782,000 238,000 246,000 $ (8,000) $ 0 1,334,000 406,000 306,000 100,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
var t
Variable selling and administrative
Total variable costs per unit
Locat
Fixed costs per month:
Fixed manufacturing overhead
Fixed selling and administrative
Total fixed cost per month
May
June
23,000
23,000
Sales
Cost
$
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 Units Sold
17,000
29,000
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
13
12
9
5
Income statements prepared by the Accounting Department using absorption costing are presented below:
39
$276,000
161,000
$437,000
May
June
$1,020,000 $1,740,000
$
276,000
1,058,000 1,058,000
1,058,000 1,334,000
276,000
782,000
238,000
246,000
(8,000) $
0
0
1,334,000
406,000
306,000
100,000
Transcribed Image Text: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 O wherever it is required.)
Variable expenses:
Variable cost of goods sold:
Total variable expenses
Fixed expenses:
Total fixed expenses
Operating income (loss)
$
May
0
0 $
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
0
0
June
0
0
0
0
0
0
3. Reconcile the variable costing and absorption costing operating income figures. (Loss amounts should be indicated with a minus
sign.)
$
May
0 $
June
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