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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

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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