Problem 8-14 Absorption and Variable Costing; Production Constant, Sales Fluctuate [L01, L02, L03, L04] 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 Sales (52,400 units) $314,400 Variable expenses: Variable cost of goods sold* $143,576 Variable selling and administrative expenses 58,688 202,264 Contribution margin 112,136 Fixed expenses: Fixed manufacturing overhead 103,360 Fixed selling and administrative expenses 23,056 126,416 Operating loss $(14,280) *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 shares 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 ifabsorption 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: Units produced 64,600 Units sold 52,400 Variable costs per unit: Direct materials 5 1.37 Direct labour $ 0.97 Variable manufacturing overhead $ 0.40 Variable selling and administrative expenses $ 1.12 Required: 1. Complete the following: 3. Compute the unit product cost under absorption costing. (Round your answer to 2 decimal places.) b. Redo the company's income statement for the month using absorption costing. (Do not leave any empty spaces; input a 0 wherever it is required.) Cost of goods sold: c. Reconcile the variable and absorption costing operating income (loss) gures. (Loss amounts should be entered with a minus sign.) Variable costing operating income (loss) _ Add: Fixed manufacturing overhead cost deferred in inventory under absorption costing Absorption costing operating income (loss) 3. During the second month of operations, the company again produced 64,600 units but sold 76,800 units' (Assume no change in total xed costs.) 3. Prepare a contribution format income statement for the month using variable costing. Variable expenses: Fixed expenses: b. Prepare an income statement for the month using absorption costing. (Do not leave any empty spaces; input a 0 wherever it is required.) Cost of goods sold: c. Reconcile the variable costing and absorption costing operating income figures. Variable costing operating income (loss) Deduct: Fixed manufacturing overhead cost released from inventory under absorption costing Absorption costing operating income (loss)