Tami Tyler opened Tami's Creations, Incorporated, 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. Sales (28,600 units) Variable expenses: Tami's Creations, Incorporated Income Statement For the Quarter Ended March 31 Variable cost of goods sold Variable selling and administrative Contribution margin Fixed expenses: Fixed manufacturing overhead $ 1,144,000 $474,760 180, 180 654,940 489,060 Fixed selling and administrative Net operating loss 284,400 218,160 502,560 (13,500) 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.