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In: Accounting

Lynch Company manufactures and sells a single product. The following costs were incurred during the company’s...

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 $ 11
Direct labor $ 8
Variable manufacturing overhead $ 1
Variable selling and administrative $ 1
Fixed costs per year:
Fixed manufacturing overhead $ 420,000
Fixed selling and administrative $ 330,000

During the year, the company produced 30,000 units and sold 25,000 units. The selling price of the company’s product is $54 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 costing:

a. Compute the unit product cost.

b. Prepare an income statement for the year.

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