1. Complete the following:

Taml Tyler opened Tamis Creations, Inc a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a conslderable straln on Ms. Tyler's personal finances. The following Income statement for the first quarter was prepared by a friend who has Just completed a course In managerlal accounting at State Unlversity. Tami's Creations, Inc. Income Statement For the Quarter Ended March 31 798,600 Sales (22000 unlts) Varlable expenses: 270,600 Varlable cost of goods sold 176,000 446.600 Varlable selling and adminlstrative 352,000 Contribution margin Fixed expenses: 212,500 Fixed manufacturing overhead 217000 429,500 Fixed selling and administrative (77.500) Net operating loss Ms. Tyler Is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA. Insists that the company should be using absorpton costing rather than varlable costing and argues that If absorption costing had been used the company would probably have reported at least some profit for the quarter. At thls polnt, Ms. Tyler is manufacturing only one product, a swlmsuit. Production and cost data relating to the swimsult for the first quarter follow 25,000 Units produced Units sold Varlable costs per unlt 22,000 Direct materials Direct labor Varlable manufacturing overhead $1.70 Varlable selling and adminlstrative 8.00 $ 760 3.00