Bell Company manufactures and sells a single product. Cost data for the product follow:

  Variable costs per unit:

      Direct materials

$

3    

      Direct labor

12    

      Variable factory overhead

3    

      Variable selling and administrative

3    

  Total variable costs per unit

$

21    

  Fixed costs per month:

      Fixed manufacturing overhead

$

120,000    

      Fixed selling and administrative

166,000    

  Total fixed cost per month

$

286,000    

    The product sells for $48 per unit. Production and sales data for May and June, the first two months of operations, are as follows:

Units
Produced

Units
Sold

  May

24,000     

20,000     

  June

24,000     

28,000     

    Income statements prepared by the accounting department, using absorption costing, are presented below:

May

June

  Sales

$

960,000     

$

1,344,000    

  Cost of goods sold

460,000     

644,000    

  Gross margin

500,000     

700,000    

  Selling and administrative expenses

226,000     

250,000    

  Net operating income

$

274,000     

$

450,000    

Required:

1.

Determine the unit product cost under absorption costing and variable costing.

2.

Prepare contribution format variable costing income statements for May and June.

3.

Reconcile the variable costing and absorption costing net operating incomes. (Loss and deduction