Just 1C, 3C
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 unitt Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative $ 7.50 $5.90 $ 1.90 $ 6.80 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 31,500 units but sold 34,500 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 costitfg net operating income (loss) for the second quarter? c. Reconcile the variable costing and absorption costing net operating incomes for the second quarter. Tami Tyler opened Tom'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 $ 1,140,000 Tami's Creations, Inc. Income Statement For the Quarter Ended March 31 Sales (28,500 units) Variable expenses: Variable cost of goods sold $ 436,050 Variable selling and administrative 193,800 Contribution margin Fixed expenses Fixed manufacturing overhead 252,000 Fixed selling and administratite 270,150 Net operating loss 629.850 510,150 522,150 $ 12,000) 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. Reg 1A Reg 1B Req 1C Req 3A Reg 3B Compute the unit product cost under absorption costing. (Round yo Unit product cost $ 23.30 Res 1 What is the company's absorption costing net operating income (loss) for the quarter? (Round to 2 decimal places.) Tami's Creations, Inc. Absorption Costing Income Statement Total Sales $ 1,140,000 664,050 Cost of goods sold Gross margin Selling and administrative expenses Net operating income (loss) 475,950 463,950 12,000 $ During the second quarter of operations, the company again produced 31,500 units but sold 34,500 units. What is the company's variable costing net operating income (loss) for the second quarter? $ 1,380,000 Tami's Creations, Inc. Variable Costing Income Statement Sales Variable expenses: Variable cost of goods sold 527,850 Variable selling and administrative 234,600 762,450 617,550 Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative 252,000 270,150 522,150 Net operating income (loss) 95,400 Req 1A Reg 1B Reg 10 Reg 3A Reg 3B Reg 3C During the second quarter of operations, the company again produced 31,500 units but sold 34,500 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 $ 1,380,000 803,850 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income (loss) 576,150 504,750 $ 71,400
