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. $1,160,000 Tani's Creation, Inc. Income Statement For the Quarter Ended March 31 Sales (29,000 unite) Variable expenses Variable cont of goods sold $ 461,100 Variable welling and administrative 176,900 Contribution margin Fixed expanas: Fixed manufacturing overhead 288,000 Pixed selling and administrative 247,500 Not operating losa 638,000 522,000 535,500 $ 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: 32,000 29,000 Units produced Units sola Variable costs per unit Direct materials Dirut labor Variable manufacturing overbond Variable selling and administrative $7.30 5 6.80 61.90 $ 6.10 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: 32,000 29,000 Units produced Units sold Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative $ 7.30 $.6.80 $ 1.80 $ 6.10 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 32,000 units but sold 35,000 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 (oss) for the second quarter? c. Reconcile the variable costing and absorption costing net operating incomes for the second quarter
