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.

Tami Tyler opened Tamis 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 Unlversity. Tami s Creations, Inc Income Statement For the Quarter Ended March 31 Sales (23,000 units) Variable expenses $834, 900 Variable cost of goods sold Variable selling and administrative $266, 800 184, 000 450, 800 384, 100 Contribution margin Fixed expenses Fixed manufacturing overhead Fixed selling and administrative 218, 400 221, 000 439, 400 55, 300) Net operating loss $ 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 polnt, Ms. Tyler is manufacturing only one product-a swimsult. Production and cost data relating to the swimsult for the first quarter follow: Units produced Units sold Variable costs per unit 26, 000 23, 000 Direct material:s Direct labor Variable manufactuing overhead Variable selling and administrative $ 7. 10 3.00 $1.50 $8.00 Requlrec 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 varlable and absorption costing net operating Income (loss) figures. 3. During the second quarter of operations, the company agaln produced 26,000 units but sold 29,000 units. (Assume no change In total fixed costs.) a. What Is the company's varlable 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 varlable costing and absorption costing net operating Incomes for the second quarter