(L. OBJ. 2, 3) Preparing variable and absorption costing income statements, and identifying pros and cons [35-40 minutes] Mp3 Musico Co. manufactures mp3 players. The company had beginning inventory of 1,000 mp3 players. These players had $30 each in variable costs per player and $2 each in fixed manufacturing costs per player. The following data pany's production records for two months of 2011 are from the com- July 2011 $ 5.00 $ 14.00 10.00 $70,000 $20,000 40,000 40,300 $ 40 une 2011 $ 5.00 $ 14.00 Direct materials cost per mp3 player Direct labor cost per mp3 player Variable manufacturing overhead cost per mp3 player Total fixed manufacturing overhead costs Total fixed selling and administrative costs Number of mp3 players produced Number of mp3 players sold Sale price per mp3 player S 10.00 $70,000 $20,000 35,000 34,800 $ 40 Requirements 1. Assuming a FIFO cost flow, compute the product cost per mp3 player pro 2. Prepare monthly income statements for June and July, using under absorption costing and under variable costing. roduced a. absorption costing b. variable costing. 3. Is operating income higher under absorption costing or variable costing in June In July? Give two reasons why and explain the pattern of differences in oper ing income based on absorption costing versus variable costing