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.

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:

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.

$ 1,144,000 Tami's Creations, Inc. Income Statement For the Quarter Ended March 31 Sales (28,600 units) Variable expenses: Variable cost of goods sold $ 460,460 Variable selling and administrative 194,480 Contribution margin Fixed expenses: Fixed manufacturing overhead 252,800 Fixed selling and administrative 248,260 Net operating loss 654,940 489,060 501,060 $ ( 12,000) 31,600 28,600 Units produced Units sold Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative $ 7.10 $ 7.30 $ 1.70 $ 6.80