2.

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses are $20.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: $ Sales Variable expenses Contribution margin Fixed expenses Net operating income 960,000 480,000 480,000 180,000 300,000 $ 6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.40 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's sales by 25%. How much could the president increase this year's advertising expense and still earn the same $300,000 net operating income as last year? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req3 Req 4A Req 4B Req 5A Req 5B Reg 6 The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.40 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's sales by 25%. How much could the president increase this year's advertising expense and still earn the same $300,000 net operating income as last year? Show less A The amount by which advertising can be increased is Tami Tyler opened Tami's Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain 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 managerial accounting at State University. $ 1,124,000 Tami's Creations, Inc. Income Statement For the Quarter Ended March 31 Sales (28,100 units) Variable expenses: Variable cost of goods sold $ 446,790 Variable selling and administrative 188,270 Contribution margin Fixed expenses: Fixed manufacturing overhead 279,900 Fixed selling and administrative 222,540 Net operating loss 635,060 488,940 502,440 $ ( 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: 31,100 28,100 Units produced Units sold Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative $ 7.10 $ 6.90 $ 1.90 $ 6.70 Required: 1. Complete the following: a. Compute the unit product cost under absorption costing. b. What is the company's absorption costing net operating income (loss) for the quarter? c. Reconcile the variable and absorption costing net operating income (loss) figures. 3. During the second quarter of operations, the company again produced 31,100 units but sold 34,100 units. (Assume no change in total fixed costs.) a. What is the company's variable costing net operating income (loss) for the second quarter? b. What is the company's absorption costing net operating income (loss) for the second quarter? c. Reconcile the variable costing and absorption costing net operating incomes for the second quarter. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 1C Req Req 3B Req 3C Compute the unit product cost under absorption costing. (Round your answer to 2 decimal places.) Unit product cost Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 1C Req Req 3B Req 3C What is the company's absorption costing net operating income (loss) for the quarter? (Round your intermediate calculations to 2 decimal places.) Tami's Creations, Inc. Absorption Costing Income Statement Total Net operating income (loss) Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 1C Req Req 3B Req 3C Reconcile the variable and absorption costing net operating income (loss) figures. (Losses and deductions should be entered as a negative.) Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Variable costing net operating income (loss) Absorption costing net operating income (loss) Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 1C Req Req 3B Req 3C During the second quarter of operations, the company again produced 31,100 units but sold 34,100 units. What is the company's variable costing net operating income (loss) for the second quarter? Tami's Creations, Inc. Variable Costing Income Statement Net operating income (loss) Complete this question by entering your answers in the tabs below. Req 1A Reg 1B Req 1C Req Req 3B Req 3C During the second quarter of operations, the company again produced 31,100 units but sold 34,100 units. What is the company's absorption costing net operating income (loss) for the second quarter? (Round your intermediate calculations to 2 decimal places.) Tami's Creations, Inc. Absorption Costing Income Statement Total Net operating income (loss) Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Req 1C Req Req 3B Req 3C During the second quarter of operations, the company again produced 31,100 units but sold 34,100 units. Reconcile the variable costing and absorption costing net operating incomes (losses) for the second quarter. (Losses and deductions should be entered as a negative.) Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Variable costing net operating income (loss) Absorption costing net operating income (loss)