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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 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 Tani's Creations, Incorporated Income Statement For the Quarter Ended March 31 Sales (28,900 units) $ 1,156,000 Variable expenses: Variable cost of goods sold 5.447,950 Variable selling and administrative 193,630 641.580 Contribution margin 514,420 Fixed expenses: Fixed manufacturing overhead 255,200 Fixed selling and administrative 271, 220 526,420 Net operating loss $ ( 12,000) 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 be 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 31,900 Units sold 28.900 Variable costs per unit: Direct materials $ 7.40 Direct labor $.6.40 Variable manufacturing overhead $ 1.70 Variable selling and administrative $6.70 Variable selling and administrative $ 6.70 Required: 1. 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. 3. During the second quarter of operations, the company again produced 31,900 units but sold 34,900 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 for the second quarter. es

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