Lynch Company manufactures and sells a single product. The following costs were incurred during the company's first year of operations:
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Variable costs per unit:
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Manufacturing:
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Direct materials
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$ 10
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Direct labor
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$ 5
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Variable manufacturing overhead
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$ 1
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Variable selling and administrative
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$ 1
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Fixed costs per year:
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Fixed manufacturing overhead
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$ 385,000
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Fixed selling and administrative
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$ 295,000
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During the year, the company produced 35,000 units and sold 17,000 units. The selling price of the company's product is $58 per unit.
Required:
1. Assume that the company uses absorption costing:
a. Compute the unit product cost.
b. Prepare an income statement for the year.
Absorption income statement
2. Assume that the company uses variable costing:
- Compute the unit product cost.
Prepare an income statement for the year.
Variable costing income statement