ami 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 (28,400 units) $ 1,136,000 Variable expenses: Variable cost of goods sold $ 474,280 Variable selling and administrative 193,120 667,400 Contribution margin 468,600 Fixed expenses: Fixed manufacturing overhead 300,600 Fixed selling and administrative 190,500 491,100 Net operating loss $ ( 22,500) 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 33,400 Units sold 28,400 Variable costs per unit: Direct materials $ 7.10 Direct labor $ 7.90 Variable manufacturing overhead $ 1.70 Variable selling and administrative $ 6.80 During the second quarter of operations, the company again produced 33,400 units but sold 38,400 units. (Assume no change in total fixed costs.) What is the company’s variable costing net operating income (loss) for the second quarter?
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
Tami’s Creations, Inc. Income Statement For the Quarter Ended March 31 |
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Sales (28,400 units) | $ | 1,136,000 | ||||
Variable expenses: | ||||||
Variable cost of goods sold | $ | 474,280 | ||||
Variable selling and administrative | 193,120 | 667,400 | ||||
Contribution margin | 468,600 | |||||
Fixed expenses: | ||||||
Fixed manufacturing |
300,600 | |||||
Fixed selling and administrative | 190,500 | 491,100 | ||||
Net operating loss | $ | ( 22,500) | ||||
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 | 33,400 | ||
Units sold | 28,400 | ||
Variable costs per unit: | |||
Direct materials | $ | 7.10 | |
Direct labor | $ | 7.90 | |
Variable manufacturing overhead | $ | 1.70 | |
Variable selling and administrative | $ | 6.80 | |
During the second quarter of operations, the company again produced 33,400 units but sold 38,400 units. (Assume no change in total fixed costs.) What is the company’s variable costing net operating income (loss) for the second quarter?
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