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 (28,050 units)$1,122,000Variable expenses:Variable cost of goods sold$479,655Variable selling and administrative193,545673,200Contribution margin448,800Fixed expenses:Fixed manufacturing overhead264,400Fixed selling and administrative204,400468,800Net operating loss$( 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:
Units produced33,050Units sold28,050Variable costs per unit:Direct materials$7.50Direct labor$8.10Variable manufacturing overhead$1.50Variable selling and administrative$6.90
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 (28,050 units) $ 1, 122, 000 Variable expenses: Variable cost of goods sold $ 479 , 655 Variable selling and administrative 193 , 545 673, 200 Contribution margin 448, 800 Fixed expenses : Fixed manufacturing overhead 264, 400 Fixed selling and administrative 204, 400 468, 800 Net operating loss $ ( 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: Units produced 33 , 050 Units sold 28, 050 Variable costs per unit: Direct materials $ 7.50 Direct labor $ 8. 10 Variable manufacturing overhead $ 1. 50 Variable selling and administrative $ 6.90 Reauired: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 33,050 units but sold 38,050 units. (Assume no change in total xed 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. 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. During the second quarter of operations, the company again produced 33,050 units but sold 38,050 units. (Assume no change in total fixed costs.) What is the company's absorption costing net operating income (loss) for the second quarter? (Round your intermediate calculations to 2 decimal places.) Net operating income (loss) Required: 1. Complete the following: a. Compute the unit product cost uncler 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 33,050 units but sold 38,050 units. (Assume no change in total xed 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. Req 1A Req lB Req 1C Req 3A Req BB During the second quarter of operations, the company again produced 33,050 units but sold 38,050 units. (Assume no change in total fixed costs.) Reconcile the variable costing and absorption costing net operating incomes (losses) for the second quarter. (Losses and deductions should be entered as a negative.) Absorption costing net operating income (loss)
