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 a State University.

Tami's Creations, Inc.

Income Statement for the Quarter ended March 31st

Sales (24,000 units)= 871,200

Variable Expenses:

Variable Cost Of Goods Sold: 288,000

Variable Selling and Administrative: 187,200 475,200

Contribution Margin: 396,000

Fixed Expenses:

Fixed Manufacturing Overhead: 232,200

Fixed Selling and Administrative: 215,000 447,200

Net Operating Loss: (51,200)

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 then 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.

Units Produced: 27,000

Units Sold: 24,000

Variable Costs Per Unit:

Direct Materials: 7.20

Direct Labor: 3.00

Variable Manufacturing Overhead: 1.80

Variable Selling and Administrative: 7.80

Required:

1a.) Compute the product cost under absorption costing. (Round your intermediate and final answers to 2 decimal places.

1b.) Redo the company's income statement for the quarter using absorption costing (Round your intermediate calculations to 2 decimal places).

1c.) Reconcile the Variable and absorption costing net operating income (loss) figures. (Round your intermediate calculations to 2 decimal places).

3. During the second quarter of operations, the company again produced 27,000 units but sold 30,000 units. (Assume no changes in total fixed costs).

3a.) Prepare a contribution format income statement for the quarter using variable costing.

3b.) Prepare an income statement for the quarter using absorption costing

3c.) Reconcile the Variable costing and absorption costing net operating incomes.