Problem 7-23 Absorption and Variable Costing; Production Constant, Sales Fluctuate (L07-1, L07-2, 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 $ 1,130,000 Tami's Creations, Inc. Income Statement For the Quarter Ended March 31 Sales (28,250 units) Variable expenses Variable cost of goods sold $ 435,050 Variable selling and administrative 192,100 Contribution margin Fixed expensest Fixed manufacturing overhead 266,000 Fixed selling and administrative 256,850 Net operating loss 627.250 502,850 522,850 5 ( 20,000) 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 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 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 33,250 28,250 Units produced Units sold Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative 5 7.40 $6.30 5 1.70 $6.00 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 foss) for the quarter? c Reconcile the variable and absorption costing net operating income foss) figures 3. During the second quarter of operations, the company again produced 33 250 units but sold 38,250 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 Complete this question by entering your answers in the tabs below. 3. During the second quarter of operations, the company again produced 33,250 units but sold 38,250 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 Complete this question by entering your answers in the tabs below. Reg 1A Reg 13 Reg 1 Reg 3A Reg 38 Reg 3C Compute the unit product cost under absorption costing. (Round your answer to 2 decimal places :) Unit produd cost Req 18 >
