Managerial accounting

Leander Office Products Inc. produces and sells small products for office use. During the first month of operations, the 2. storage and organizational products sold well. Andrea Leander, the owner of the company was surprised to see a loss for the month on her income recommended to her by her bank manager. The statement follows statement. This statement was prepared by a local bookkeeping service Sales (40,000 units) Variable expenses: 200,000 Variable cost of goods sold Variable selling and administrative exspenses | $80,000 Contribution margin Fixed expenses: $110,000 Fixed manufacturing overhead Fixed selling and administrative $75,000 expenses $20,000 Total fixed expenses Operating income (loss) $95,000 S/5.000) 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 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. A friend who is an accountant insists that the company Units produced Units sold 50,000 40,000 Variable cost per unit: Direct materials Direct labour Variable manufacturing overhead $1.00 $0.80 S0.20 SO.75 Variable selling and administrative expenses Required: i. Complete the following. a Compute the unit product cost under absorption costing. b. Redo the company's income statement for month using absorption costing. c. Reconcile the variable and absorption costing operating income (loss) figures. d. Was the accountant correct in suggesting that the company really earned a "profit" for the month? Explain. li. ii. During the second month of operation, the company again produced 50,000 units but sold 60,000 units. (Assume no change in total fixed costs.) a. Prepare a contribution format income statement for the month using variable b. c. costing. Prepare an income statement for the month using absorption costing. Reconcile the variable and absorption costing operating income figures