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 (28,800 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, 152, 000 $ 480, 960 184, 320 665, 280 486, 720 Fixed selling and administrative Net operating loss 286, 200 214, 020 500, 220 $ ( 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. 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 Units sold Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative 31, 800 28, 800 $ 7.30 $ 7.80 $ 1.60 $ 6.40