Problem 7-23 Absorption and Variable Costing; Production Constant, Sales Fluctuate [LO7-1, LO7-2, LO7-3] 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. $ 1,138,000 Tami's Creations, Inc. Income Statement For the Quarter Ended March 31 Sales (28,450 units) Variable expenses: Variable cost of goods sold $ 472, 270 Variable selling and administrative 196,305 Contribution margin Fixed expenses: Fixed manufacturing overhead 301,050 Fixed selling and administrative 190,875 Net operating loss 668,575 469, 425 491,925 22,500) $ 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: 33, 450 28,450 Units produced Units sold Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative $ 7.20 $ 7.70 $ 1.70 $ 6.90 3. During the second quarter of operations, the company again produced 33,450 units but sold 38,450 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