Leander Office Products Inc. produces and sells small storage and organizational products for office use. During the first month of operations, the products sold well. Andrea Leander, the owner of the company, was surprised to see a loss for the month on her income statement. This statement was prepared by a local bookkeeping service recommended to her by her bank manager. The statement follows LEANDER OFFICE PRODUCTS INC Income Statement $291,160 Sales (50,200 units) Variable expenses Variable cost of goods sold* $134,536 Variable selling and administrative expenses 39,156173,692 Contribution margin 117,468 Fixed expenses Fixed manufacturing overhead 121,290 Fixed selling and administrative expenses 15,060 136,350 Operating loss $ (18,882) Consists of direct materials, direct labour, and variable manufacturing overhead Leander is discouraged over the loss shown for the month, particularly since she had planned to use the statement to encourage investors to purchase stock in the new company. A friend who is an accountant insists that the company should be using absorption costing rather than variable costing. He argues that if absorption costing had been used, the company would probably have reported a profit for the month Selected cost data relating to the product and to the first month of operations follow 62,200 Units produced Units sold Variable costs per unit: 50,200 $ 1.04 Direct materials Direct labour Variable manufacturing $ 1.25 $ 0.39 $ 0.78 overhead Variable selling and administrative expenses