In: Accounting
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 | $6 | |
Direct labor | $9 | |
Variable manufacturing overhead | $3 | |
Variable selling and administrative | $4 | |
Fixed costs per year: | ||
Fixed manufacturing overhead | $ | 300,000 |
Fixed selling and administrative | $ | 190,000 |
During the year, the company produced 25,000 units and sold 20,000 units. The selling price of the company’s product is $50 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.