Question - Lynch Company manufactures and sells a single product. The following costs were incurred during the company first year of operations:

Variable costs per unit:

Manufacturing:

Direct materials - $11

Direct labor - $4

Variable manufacturing overhead - $1

Variable selling and administrative - $1

Fixed costs per year:

Fixed manufacturing overhead - $308,000

Fixed selling and administrative - $210,000

During the year, the company produced 28,000 units and sold 24,000 units. The selling price of the company's product is $41 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.

2. Assume that the company uses variable casting:

a. Compute the unit product cost.

b. Prepare an income statement for the year.