Tami Tyler opened Tamis 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. Tylers 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.

Tamis Creations, Inc. Income Statement For the Quarter Ended March 31
Sales (28,600 units)				$	1,144,000
Variable expenses:
Variable cost of goods sold	$	417,560
Variable selling and administrative		171,600			589,160
Contribution margin					554,840
Fixed expenses:
Fixed manufacturing overhead		252,800
Fixed selling and administrative		314,040			566,840
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 producta swimsuit. Production and cost data relating to the swimsuit for the first quarter follow:

Units produced	31,600
Units sold	28,600
Variable costs per unit:
Direct materials		$	7.10
Direct labor		$	5.60
Variable manufacturing overhead		$	1.90
Variable selling and administrative		$	6.00

Required:

1. Complete the following:

a. Compute the unit product cost under absorption costing.

b. What is the companys 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 31,600 units but sold 34,600 units. (Assume no change in total fixed costs.)

a. What is the companys variable costing net operating income (loss) for the second quarter?

b. What is the companys 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.

Compute the unit product cost under absorption costing. (Round your answer to 2 decimal places.)

	Unit product cost

What is the companys absorption costing net operating income (loss) for the quarter? (Round your intermediate calculations to 2 decimal places.)

Tamis Creations, Inc.
Absorption Costing Income Statement
	Total
Sales	$1,144,000
Cost of goods sold
Gross margin	1,144,000
Selling and administrative expenses
Net operating income (loss)

Reconcile the variable and absorption costing net operating income (loss) figures. (Losses and deductions should be entered as a negative.)

Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes
Variable costing net operating income (loss)	$(12,000)
Add: Fixed manufacturing overhead cost deferred in inventory under absorption costing
Absorption costing net operating income (loss)

During the second quarter of operations, the company again produced 31,600 units but sold 34,600 units. What is the companys variable costing net operating income (loss) for the second quarter?

Tamis Creations, Inc.
Variable Costing Income Statement
Sales
Variable expenses:
Variable cost of goods sold
Variable selling and administrative
		0
Contribution margin		0
Fixed expenses:
Fixed manufacturing overhead	252,800
Fixed selling and administrative	314,040
		566,840
Net operating income (loss)

During the second quarter of operations, the company again produced 31,600 units but sold 34,600 units. What is the companys absorption costing net operating income (loss) for the second quarter? (Round your intermediate calculations to 2 decimal places.)

Tamis Creations, Inc.
Absorption Costing Income Statement
	Total
Sales
Cost of goods sold
Gross margin	0
Selling and administrative expenses
Net operating income (loss)

During the second quarter of operations, the company again produced 31,600 units but sold 34,600 units. Reconcile the variable costing and absorption costing net operating incomes (losses) for the second quarter. (Losses and deductions should be entered as a negative.)

Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes
Variable costing net operating income (loss)
Absorption costing net operating income (loss)