Please show all work! Thanks!! Tami Tyler opened Tami\'s Creations, Inc., a smal

Question

Please show all work! Thanks!!

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 Sales (24,000 units) Variable expenses: $ 871,200 Variable cost of goods sold Variable selling and administrative $300,000 189,600 489,600 381,600 Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative 221,400 219,000 440,400 Net operating loss 58,800) 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: Units produced Units sold Variable costs per unit: 27,000 24,000 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative $ 7.50 $ 3.10 $ 1.90 $ 7.90

Explanation / Answer

Requirement 1a)

Requirement 1a)

Unit cost under Absorption costing Direct Material 7.5 Direct labour 3.1 Variable Manufacturing overheads 1.9 Fixed Manufacturing overheads (221400/27000) 8.2 Absorption costing unit prroduct cost 20.7 Requirement 1b) Income Statement under Absorption Costing Sales $871,200 Cost of Goods sold (300000+221400) 521400 Gross Margin $349,800 Selling and distribution expense (189600+219000) 408,600 Net operating income -58,800 Requirement 1c) Reconciliation Statement: Net income under Variable cocsting -60900 Add: Fixed cost deferred to next year (3000 units*8.2) 24600 Net income under Absorption costing -36300 Requirement 2a) Income Statement under variable costing Sales 1,089,000 Less: Variable cost    variable cost of goods sold (30000/27000)*30000 375,000    Variable selling expense (189600/27000)*30000 237,000 612,000 Contribution margin 477,000 Fixed expense:    Fixed Manufacturing overheads 221,400    Fixed selling expense 219,000 Net operating Income 36,600 Requirement 3b) Income Stataement under Absorption Costing Sales $1,089,000 Cost of Goods sold (30000*20.7) 621000 Gross Margin $468,000 Selling and distribution expense (30000*7.9)+219000 456,000 Net operating income 12,000 Requirement 3c) Reconciliation Statement: Net income under variable costing 36,600 Less: Fixed OH released in beginning inventory (3000 units @8.2) 24600 Net income under Absroption costing 12,000

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.