Jon Tyler started a small manufacturing company, JT Enterprises, at the beginning of 2005. Joan has prepared the following income statement for the first quarter of operations.

The variable cost of goods sold includes the costs of direct materials, direct labor, and variable manufacturing overhead. The company began the quarter with no inventory; it manufactured 30,000 units over the period. Variable selling and administrative expenses are based on units sold.

Required
a. Calculate the unit product cost using absorption costing.
b. Rework the income statement using absorption costing.
c. Does the net loss figure change using absorption costing? If yes, explain why.
d. During the second quarter of operations, JT again manufactured 30,000 units but sold 35,000 units. Prepare income statements for the second quarter using both the variable and absorption-costing methods.
e. Explain the difference in net income (or loss) in the second quarter between the two statements prepared in requirement(D).

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JT Enterprises Income Statement For the Quarter Ended March 31, 2005 Sakes revenue (25,000 units) Less variable costs: $1,200,000 S540,000 Variable cost of goods sold Variable selling and administrative expenses 260,000 800,000 Contribution margin S400,000 less fixed costs Fixed manufacturing overhead fixed selling and administrative S300,000 expenses 150,000 450,000 Net loss (S50,000)