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Taml Tyler opened Taml's Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through Its first quarter of operations
Taml Tyler opened Taml'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 straln 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 managerlal accounting at State University. Tami's Creations, Inc. Income Statement For the Quarter Ended March 31 Sales (22,000 units) Variable expenses: $ 798,600 Variable cost of goods sold Variable selling and administrative $264,000 171,600 435,600 Contribution margin Fixed expenses: 363,008 Fixed manufacturing overhead Fixed selling and administrative221,00e 202,500 423,500 Net operating loss 60,500) 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 varlable 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 polnt, Ms. Tyler is manufacturing only one product-a swimsuit. Production and cost data relating to the swimsult for the first quarter follow
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