1 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: 15 LEANDER OFFICE PRODUCTS INC. points Income Statement Sales (41,400 units) Skipped Variable expenses: Variable cost of goods sold* Variable selling and administrative expenses Contribution margin eBook Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative expenses Operating loss. Print $264,960 $126,684 48,438 175,122 89,838 90,828 14,490 105,318 $(15,480) *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: Units produced Units sold Variable costs per unit: Direct materials Direct labour Variable manufacturing overhead 52,200 41,400 $ 1.47 $ 1.22 $ 0.37 Variable selling and administrative expenses $ 1.17 Required: 4. Complete the followingu
1 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: 15 LEANDER OFFICE PRODUCTS INC. points Income Statement Sales (41,400 units) Skipped Variable expenses: Variable cost of goods sold* Variable selling and administrative expenses Contribution margin eBook Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative expenses Operating loss. Print $264,960 $126,684 48,438 175,122 89,838 90,828 14,490 105,318 $(15,480) *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: Units produced Units sold Variable costs per unit: Direct materials Direct labour Variable manufacturing overhead 52,200 41,400 $ 1.47 $ 1.22 $ 0.37 Variable selling and administrative expenses $ 1.17 Required: 4. Complete the followingu
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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:
15
LEANDER OFFICE PRODUCTS INC.
points
Income Statement
Sales (41,400 units)
Skipped
Variable expenses:
Variable cost of goods sold*
Variable selling and administrative expenses
Contribution margin
eBook
Fixed expenses:
Fixed manufacturing overhead
Fixed selling and administrative expenses
Operating loss.
Print
$264,960
$126,684
48,438
175,122
89,838
90,828
14,490 105,318
$(15,480)
*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:
Units produced
Units sold
Variable costs per unit:
Direct materials
Direct labour
Variable manufacturing overhead
52,200
41,400
$ 1.47
$ 1.22
$ 0.37
Variable selling and administrative expenses
$
1.17
Required:
4. Complete the followingu
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