Question

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.

Reconcile the variable and absorption costing net operating income (loss) figures.  (Losses and deductions should be entered as a negative.)

	Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Variable costing net operating income (loss) Absorption costing net operating income (loss)

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’s Creations, Inc. Variable Costing Income Statement Sales Variable expenses: Variable cost of goods sold Variable selling and administrative 0 Contribution margin 0 Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative 0 Net operating income $0

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	$	445,880
Variable selling and administrative		194,540			640,420
Contribution margin					495,580
Fixed expenses:
Fixed manufacturing overhead		323,980
Fixed selling and administrative		195,850			519,830
Net operating loss				$	( 24,250)

Answer 1