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.

Tami's Creations, Inc.

Income Statement

For the Quarter Ended March 31

Sales (28,200 units) $1,128,000

Variable expense:

Variable cost of goods sold: $456,840

Variable selling and administrative: 197,400 654,240

Contribution margin 473,760

Fixed expenses:

Fixed manufacturing overhead 249,600

Fixed selling and administrative 236,160 485,760

Net operating loss $( 12,000)

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:

Units produced 31,200

Units sold 28,200

Variable costs per unit:

Direct materials $7.50

Direct labor $7.20

Variable manufacturing overhead $1.50

Variable selling and administrative $7.00

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 (loss) for the quarter?

c. Reconcile the variable and absorption costing net operating income (loss) figures.

3. During the second quarter of operations, the company again produced 31,200 units but sold 34,200 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.

Homework-Chapter 6 i Saved Check my work mode : This shows what is correct or incorrect for the work you have completed so far. It does not in 5 During the second quarter of operations, the company again produced 31,200 units but sold 34,200 units. What is the company's variable costing net operating income (loss) for the second quarter? Tami's Creations, Inc. Variable Costing Income Statement points Sales 1 368,000 Variable expenses Variable cost of goods sold 564,300 X Variable selling and administrative 205,200 X 769,500 Contribution margin 598 500 Fixed expenses: Fixed manufacturing overhead 249.600 Fixed selling and administrative 236. 160 485 760 let operating income (loss $ 112,740 X ME Prev. Graw Hill 99+