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Problem 8-14 Absorption and Variable Costing; Production Constant, Sales Fluctuate [LO1, LO2, LO3, LO4] 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: Sales (51,200 units) Variable expenses: Variable cost of goods sold* Variable selling and administrative expenses Contribution margin. Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative expenses Operating loss LEANDER OFFICE PRODUCTS INC. Income Statement Units produced Units sold Variable costs per unit: Direct materials Direct labour Variable manufacturing overhead Variable selling and administrative expenses Unit product cost $128,000 51,712 *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 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: 104,805 18,944 4.20 $291,840 179,712 112, 128 123,749 $(11,621) 61, 650 51,200 Required: 1. Complete the following: a. Compute the unit product cost under absorption costing. (Round your answer to 2 decimal places.) $ 1.36 $ 0.90 $ 0.24 $ 1.01

Problem 8-14 Absorption and Variable Costing; Production Constant, Sales Fluctuate [LO1, LO2, LO3, LO4] 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: Sales (51,200 units) Variable expenses: Variable cost of goods sold* Variable selling and administrative expenses Contribution margin. Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative expenses Operating loss LEANDER OFFICE PRODUCTS INC. Income Statement Units produced Units sold Variable costs per unit: Direct materials Direct labour Variable manufacturing overhead Variable selling and administrative expenses Unit product cost $128,000 51,712 *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 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: 104,805 18,944 4.20 $291,840 179,712 112, 128 123,749 $(11,621) 61, 650 51,200 Required: 1. Complete the following: a. Compute the unit product cost under absorption costing. (Round your answer to 2 decimal places.) $ 1.36 $ 0.90 $ 0.24 $ 1.01

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 6CE
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Problem 8-14 Absorption and Variable Costing; Production Constant, Sales Fluctuate [LO1, LO2, LO3, LO4] 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: Sales (51,200 units) Variable expenses: Variable cost of goods sold* Variable selling and administrative expenses Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative expenses Operating loss LEANDER OFFICE PRODUCTS INC. Income Statement Units produced Units sold Variable costs per unit: Direct materials. Direct labour Variable manufacturing overhead Variable selling and administrative expenses Unit product cost $128,000 51,712 *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 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: 104,805 18,944 4.20 $291,840 179,712 112, 128 123,749 $(11,621) 61, 650 51, 200 $ 1.36 $ 0.90 Required: 1. Complete the following: a. Compute the unit product cost under absorption costing. (Round your answer to 2 decimal places.) $ 0.24 $ 1.01
Transcribed Image Text:Problem 8-14 Absorption and Variable Costing; Production Constant, Sales Fluctuate [LO1, LO2, LO3, LO4] 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: Sales (51,200 units) Variable expenses: Variable cost of goods sold* Variable selling and administrative expenses Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative expenses Operating loss LEANDER OFFICE PRODUCTS INC. Income Statement Units produced Units sold Variable costs per unit: Direct materials. Direct labour Variable manufacturing overhead Variable selling and administrative expenses Unit product cost $128,000 51,712 *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 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: 104,805 18,944 4.20 $291,840 179,712 112, 128 123,749 $(11,621) 61, 650 51, 200 $ 1.36 $ 0.90 Required: 1. Complete the following: a. Compute the unit product cost under absorption costing. (Round your answer to 2 decimal places.) $ 0.24 $ 1.01
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