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. $ 1,136,000 Tami's Creations, Inc. Income Statement For the Quarter Ended March 31 Sales (28,400 units) Variable expenses: Variable cost of goods sold $ 417,480 Variable selling and administrative 195,960 Contribution margin Fixed expenses: Fixed manufacturing overhead 267,200 Fixed selling and administrative 275, 362 Net operating loss 613,440 522,560 542,560 $ ( 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: 33,400 28,400 Units produced Units sold Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative $ 7.20 $ 5.80 $ 1.70 $ 6.90 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 (oss) for the quarter? c. Reconcile the variable and absorption costing net operating income (oss) figures. 3. During the second quarter of operations, the company again produced 33,400 units but sold 38,400 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. During the second quarter of operations, the company again produced 33,400 units but sold 38,400 units. (Assume no change in total fixed costs.) What is the company's variable costing net operating income (loss) for the second quarter? Tami's Creations, Inc. Variable Costing Income Statement Sales Variable expenses: Variable cost of goods sold Variable selling and administrative 0 0 Contribution margin Fixed expenses Fixed manufacturing overhead Fixed selling and administrative 0 Net operating income (loss) During the second quarter of operations, the company again produced 33,400 units but sold 38,400 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.) Tami's Creations, Inc. Absorption Costing Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income (loss) 0 Reg 1A Reg 1B Req 1C Reg Reg Reg 3C During the second quarter of operations, the company again produced 33,400 units but sold 38,400 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.) Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Variable costing net operating income (loss) Absorption costing net operating income (loss)
