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 just completed a course in managerial accounting at State University.

Ms$.$ Tyler is discouraged over the loss shown for the quarter, particularly because she hoped to use the statement as support for a

bank loan. Another friend, a CPA, insists the company should be using absorption costing rather than variable costing and claims if

absorption costing had been used, the company probably would have reported a profit for the quarter.

At this point, Ms$.$ Tyler makes only one product$-$a swimsuit. Production and cost data for the first quarter follow:

Required:

Complete the following:

a$.$ Compute the unit product cost under absorption costing.

b$.$ What is the company's absorption costing net operating income $($loss$)$ for the quarter?

c$.$ Reconcile the variable and absorption costing net operating income $($loss$)$ figures.

During the second quarter of operations, the company again produced $32,000$ units but sold $35,000$ 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 $($losses$)$ for the second quarter.

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