Problem $6-23($Algo$)$ Absorption and Variable Costing; Production Constant, Sales Fluctuate $[$LO$6-1,[06-2,$ L$06-3]$

Tami Tyler opened Tami's Creations, Incorporated, 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 just completed a course in managerlal accounting at State University.

Ms$.$ Tyler is discouraged over the loss shown for the quarter, particularly because she hoped to use the statement as support for a bank loan. Another friend, a CPA, Insists the company should be using absorption costing rather than variable costing and claims if absorption costing had been used, the company probably would have reported a profit for the quarter.

At this point, Ms$.$ Tyler makes only one product$-$a swimsuit. Production and cost data for the first quarter follow:

Units produced

$31,200$

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$20$ of $25$

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At this point, Ms$.$ Tyler makes only one product$-$a swimsult. Production and cost data for the first quarter follow.

$\backslash$table$[[$Units produced,$31,200],[$Units sold,$28,200],[$Variable costs per unit:,$$7\mathrm{.}50$