For this assignment, you are required to complete the problem, showing your grasp of the chapter, as well as, the ability to apply the concepts through calculation and analysis and to discuss the aspects of Variable Costing.You are required to:

1. Determine the unit cost under

1. Absorption costing.
2. Variable costing.

2. Prepare variable costing income statements for May and June using the contribution approach.

3. Reconcile the variable costing and absorption costing operating income figures.

4. The company's Accounting Department has determined the break-even point to be 14,000 units per month, computed as follows:

Fixed cost per month = $420,000 = 14,000 units

Unit contribution margin $30 per unit On receiving this figure, the president commented, "There's something peculiar here. The comptroller says that the break-even point is 14,000 units per month. Yet we sold only 13,000 units in May, and the income statement we received showed a $2,000 profit. Which figure do we believe?" Write a brief explanation of what happened on the May income statement.