Problem $8-14$ Absorption and Variable Costing: Production Constant, Sales Fluctuate $[$LO$1,$ LO$2,$ LO$3,$

L$04]$

Leander Office Products inc produces and sells small storage and arganizational products for office use. During the first month of

aperations, the products sold well. Andrea Leandet, 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 bookkeping service recommended to her by her bank manager. The

statement follows:

'Consists of direct materials, direct labour, and variable manufacturing owerhead.

Leander is dscouraged over the lass 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

proft for the month.

Selected cast data relating to the product and to the first month of operations follow.

Required:

Complete the following:

a$.$ Compute the unit product cost under absarptian casting. $($Round your answer to $2$ declmal places.$)$

b$.$ Redo the company's income statement for the month using absorption coating. $($Do not ieave any empty spaces; input a $0$

wherever it is required.$]$