***The last person who answered, did not answer the questions in format. Please
ID: 2574344 • Letter: #
Question
***The last person who answered, did not answer the questions in format. Please provide the answers for the required fields on the chart. Label the answers please or list them in a chart like the ones provided in the question.***
*CHECK NUMBERS; PLEASE PROVIDE AN EXPLAINATION FOR EACH AND ANSWER EACH PART FOR QUESTIONS #1-#3 WITH FORMULAS*
Tami Tyler opened Tami’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 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.
Tami’s Creations, Inc.
Income Statement
For the Quarter Ended March 31
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 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:
$
Required:
1. Complete the following:
a. Compute the unit product cost under absorption costing. (Round your intermediate and final answers to 2 decimal places.)
Unit Product Cost:_______________
b. Redo the company’s income statement for the quarter using absorption costing. (Round your intermediate calculations to 2 decimal places.)
+
c. Reconcile the variable and absorption costing net operating income (loss) figures. (Round your intermediate calculations to 2 decimal places.)
+
3. During the second quarter of operations, the company again produced 25,000 units but sold 28,000 units. (Assume no change in total fixed costs.)
a. Prepare a contribution format income statement for the quarter using variable costing. (Round your intermediate calculations to 2 decimal places.)
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b. Prepare an income statement for the quarter using absorption costing. (Round your intermediate calculations to 2 decimal places.)
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c. Reconcile the variable costing and absorption costing net operating incomes. (Round your intermediate calculations to 2 decimal places.)
Tami’s Creations, Inc.
Income Statement
For the Quarter Ended March 31
Sales (22,000 units) $ 798,600 Variable expenses: Variable cost of goods sold $ 257,400 Variable selling and administrative expenses 176,000 433,400 Contribution margin 365,200 Fixed expenses: Fixed manufacturing overhead 202,500 Fixed selling and administrative expenses 218,000 420,500 Net operating loss $ ( 55,300 )Explanation / Answer
1. a.
Fixed cost per unit under absorption costing= Total fixed cost/ number of units produced
Fixed manufacturing overhead==202500/25000= 8.1 per unit produced
Fixed selling and administrative expenses= =218000/25000= 8.72 per unit produced
b. Income statement under absorption costing:
c.
3.
b.
c.
Note:
Kindly note that fixed costs under absorption costing are allocated to all units produced, if any item is not sold respective fixed cost portion will be carried forward to next period with the opening inventory.
Under variable costing fixed costs are not allocated to inventory only variable costs are carried to next period if any item is not sold.
Hence the reconciling item in profit is only the fixed related portion either carried forward to next quarter or carried forward from previous quarter.
Unit product cost under absorption costing: Variable costs per unit: Direct materials 7.2 Direct labor 2.7 Variable manufacturing overhead 1.8 Variable selling and administrative 8 Total variable costs per unit 19.7 19.7 Fixed costs per unit: Fixed manufacturing overhead* 8.10 Fixed selling and administrative expenses** 8.72 Total fixed costs per unit: 16.82 16.82 Total unit cost 36.52Related Questions
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