Tami Tyler opened Tami\'s Creations, Inc., a small manufacturing company, at the

Question

Tami Tyler opened Tami's Creations, Inc., a small manufacturing company, at the beginning of the year Geting the company through its first quarter of operations placed a considerable strain on Ms Tyfer's personal finances The tollowing income statement for the first quarter was prepared by a friend who has just completed a course in managerial accounting at State University Tami's Creations, Inc Income Statement For the Quarter Ended March 31 $ 798,600 Sales (22,000 units) Variable expenses $ 259,600 Variable cost of goods sold Variable selling and administrative 172,700432,300 366,300 Contribution margin Fixed expenses Fixed manufacturing overhead Fixed selling and administrative 202,500 218,000 420,500 Net operating loss S (54,200) 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 been used the company would probably 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 Units sold Variable costs ner unit 25,000 22,000

Explanation / Answer

Solution 1a:

Solution 1b:

Solution 1c:

Solution 3a:

Solution 3b:

Solution 3c:

Computation of Unit Product Cost - Absorption Costing Particulars Per unit Direct material $7.10 Direct Labor $2.80 Variable manufacturing overhead $1.90 Fixed manufacturing overhead ($202,500/25000) $8.10 Unit Product Cost $19.90

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