$1,140,000 Income Statemen For the Quarter Ended March 31 Sales (28,500 units) Variable expenses: Variable cost of goods sold $456,000 Variable selling and 199,500 administrative Contribution margin Fixed expenses: Fixed manufacturing overhead 283,500 Fixed selling and administrative 214,500 Net operating loss 655,500 484,500 498,000 $( 13,500) 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 absorption costing rather than variable costing and argues that if absorption costing had been used the company probably would have reported at least some profit for the quarter. At this point, Ms. Tyler Is manufacturing only one product-a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow: 31,500 28,500 Units produced Units sold Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative $7.40 $6.80 $ 1.80 $7.00