Tami Tyler opened Tami’s Creations, Inc., a small manufacturingcompany, at the beginning of the...

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Tami Tyler opened Tami’s Creations, Inc., a small manufacturingcompany, at the beginning of the year. Getting the company throughits first quarter of operations placed a considerable strain on Ms.Tyler’s personal finances. The following income statement for thefirst quarter was prepared by a friend who has just completed acourse in managerial accounting at State University. Tami’sCreations, Inc. Income Statement For the Quarter Ended March 31Sales (22,000 units) $ 798,600 Variable expenses: Variable cost ofgoods sold $ 270,600 Variable selling and administrative 172,700443,300 Contribution margin 355,300 Fixed expenses: Fixedmanufacturing overhead 200,000 Fixed selling and administrative218,000 418,000 Net operating loss $ ( 62,700) Ms. Tyler isdiscouraged over the loss shown for the quarter, particularlybecause she had planned to use the statement as support for a bankloan. Another friend, a CPA, insists that the company should beusing absorption costing rather than variable costing and arguesthat if absorption costing had been used the company probably wouldhave reported at least some profit for the quarter. At this point,Ms. Tyler is manufacturing only one product—a swimsuit. Productionand cost data relating to the swimsuit for the first quarterfollow: Units produced 25,000 Units sold 22,000 Variable costs perunit: Direct materials $ 7.50 Direct labor $ 2.80 Variablemanufacturing overhead $ 2.00 Variable selling and administrative $7.85 Required: 1. Complete the following: a. Compute the unitproduct cost under absorption costing. b. What is the company’sabsorption 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, thecompany again produced 25,000 units but sold 28,000 units. (Assumeno change in total fixed costs.) a. What is the company’s variablecosting net operating income (loss) for the second quarter? b. Whatis the company’s absorption costing net operating income (loss) forthe second quarter? c. Reconcile the variable costing andabsorption costing net operating incomes for the second quarter

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Solution 1a Computation of Unit Product Cost Absorption Costing Particulars Per unit Direct material 750 Direct Labor 280 Variable manufacturing overhead 200 Fixed manufacturing overhead 200000 25000 800 Unit Product Cost 2030 Solution 1b Tami Creations Full Absorption income statement For the Quarter ended March 31 Particulars Details Amount Sales 798600 Cost of Goods Sold Cost of goods produced See Answer

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In: AccountingTami Tyler opened Tami’s Creations, Inc., a small manufacturingcompany, at the beginning of the year....Tami Tyler opened Tami’s Creations, Inc., a small manufacturingcompany, at the beginning of the year. Getting the company throughits first quarter of operations placed a considerable strain on Ms.Tyler’s personal finances. The following income statement for thefirst quarter was prepared by a friend who has just completed acourse in managerial accounting at State University. Tami’sCreations, Inc. Income Statement For the Quarter Ended March 31Sales (22,000 units) $ 798,600 Variable expenses: Variable cost ofgoods sold $ 270,600 Variable selling and administrative 172,700443,300 Contribution margin 355,300 Fixed expenses: Fixedmanufacturing overhead 200,000 Fixed selling and administrative218,000 418,000 Net operating loss $ ( 62,700) Ms. Tyler isdiscouraged over the loss shown for the quarter, particularlybecause she had planned to use the statement as support for a bankloan. Another friend, a CPA, insists that the company should beusing absorption costing rather than variable costing and arguesthat if absorption costing had been used the company probably wouldhave reported at least some profit for the quarter. At this point,Ms. Tyler is manufacturing only one product—a swimsuit. Productionand cost data relating to the swimsuit for the first quarterfollow: Units produced 25,000 Units sold 22,000 Variable costs perunit: Direct materials $ 7.50 Direct labor $ 2.80 Variablemanufacturing overhead $ 2.00 Variable selling and administrative $7.85 Required: 1. Complete the following: a. Compute the unitproduct cost under absorption costing. b. What is the company’sabsorption 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, thecompany again produced 25,000 units but sold 28,000 units. (Assumeno change in total fixed costs.) a. What is the company’s variablecosting net operating income (loss) for the second quarter? b. Whatis the company’s absorption costing net operating income (loss) forthe second quarter? c. Reconcile the variable costing andabsorption costing net operating incomes for the second quarter