- Problem 8 14 Absorption And Variable Costing Production Constant Sales Fluctuate Lo1 Lo2 Lo3 Lo4 Leander Office P 1 (141.69 KiB) Viewed 40 times
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 (53,400 units) Variable expenses: Variable cost of goods sold* Variable selling and administrative expenses Contribution margin LEANDER OFFICE PRODUCTS INC. Income
Statement Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative expenses Operating loss Units produced Units sold Variable costs per unit: Direct materials. Direct labour $145,248 65,682 Variable manufacturing overhead Variable selling and administrative expenses 119,306 19,224 *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: $336,420 210,930 125,490 $ $ $ $ 138,530 $(13,040) 63,800 53,400 1.44 1.05 0.23 1.23
Required: 1. Complete the following: a. Compute the unit product cost under absorption costing. (Round your answer to 2 decimal places.) Unit product cost 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: 0 $ 0 0
c. Reconcile the variable and absorption costing operating income (loss) figures. (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) Variable expenses: 2. This part of the
question is not part of your Connect assignment. 3. During the second month of operations, the
company again produced 63,800 units but sold 74,200 units. (Assume no change in total fixed costs.) a. Prepare a contribution format income
statement for the month using variable costing. Fixed expenses: $ 0 0 $ 0 0 0
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: 0 $ 0 0 0 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) S 0