In: Accounting
2.Lynch Company manufactures and sells a single product. The following costs were incurred during the company’s first year of operations:
Variable costs per unit: | ||
Manufacturing: | ||
Direct materials | $ | 12 |
Direct labor | $ | 5 |
Variable manufacturing overhead | $ | 1 |
Variable selling and administrative | $ | 1 |
Fixed costs per year: | ||
Fixed manufacturing overhead | $ | 360,000 |
Fixed selling and administrative | $ | 270,000 |
During the year, the company produced 36,000 units and sold 18,000 units. The selling price of the company’s product is $55 per unit.
Required:
1. Assume that the company uses absorption costing:
a. Compute the unit product cost.
b. Make an income statement for the year.
2. Assume that the company uses variable costing:
a. Compute the unit product cost.
b. Make an income statement for the year.
1. ABSORPTION COSTING
a. Unit Product Cost
Particulars | $ |
Direct Materials | 12 |
Direct labor | 5 |
Variable Manufacturing overhead | 1 |
Fixed Manufacturing overhead ($360,000 / 36,000 Units) | 10 |
Total Unit Product Cost | 28 |
b. Income Statement
2. VARIABLE COSTING
a. Unit Product Cost
Particulars | $ |
Direct Materials | 12 |
Direct labor | 5 |
Variable Manufacturing overhead | 1 |
Variable selling and administrative | 1 |
Total Unit Product Cost | 19 |
b. Income Statement
All the best...