Potierre imports designer clothing manufactured by subcontractors in Mexico. Clothing is a seasonal Absorption and Variable product. The goods must be ready for sale prior to the start of the season. Any goods left over at the end Costing; Import Decisions of the season usually must be sold at steep discounts. The company prepares a dress design and selects (LO 6,7,8) fabrics approximately six months before a given season. It receives these goods and distributes them at : the start of the season. Based on past experience, the company estimates that 60 percent of a particular lot of dresses will be unsold at the end of the season and will be marked down to one-half of the initial retail price. Even with the markdown, a substantial number of dresses will remain unsold and will be returned to Cotierre and destroyed. Although a large number of dresses must be discounted or destroyed, the company needs to place a minimum order of 1,000 dresses to have a sufficient selection of styles and sizes to market the design.Recently, the company placed an order for 1,000 dresses of a particular design for 25,000plusimportdutiesof$25,000\mathrm{????}\mathrm{????}\mathrm{????}\mathrm{????}\mathrm{????}\mathrm{????}\mathrm{????}\mathrm{????}\mathrm{????}\mathrm{????}\mathrm{????}\mathrm{????}\mathrm{????}\mathrm{????}\mathrm{????}\mathrm{????}\mathrm{????}\mathrm{????}$5,000 and a $7 commission for each dress sold at retail, regardofl tehes prsic

e. Return mailing and disposing of each unsold dress cost $3 after the end of the markdown period.
Required

a. Use absorption costing to compute the cost of each dress in this lot of dresses.

b. Suppose that the company sells 30 percent of the dresses in this lot for $75 each during the first accounting period. Using absorption costing, what is the value of the ending inventory? What is the operating profit or loss for the period, assuming no other transactions and that the season has not ended, so that the number of dresses subject to markdown or to be returned is unknown?

c. During the second period, 10 percent of the 1,000 dresses were sold at full price, and 30 percent were sold at the half-price markdown. The remaining dresses were returned and disposed of.
Using absorption costing, what is the operating profit or loss for the period, assuming no other transactions?

d. Suggest a method to account for these dresses that would more closely relate revenues and costs.