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Ms . Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a
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 producta swimsuit. Production and cost data relating to the swimsuit for the first
quarter follow:
Required:
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.
During the second quarter of operations, the company again produced units but sold 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 losses for the second quarter.
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