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 | $ | 10 |
Direct labor | $ | 7 |
Variable manufacturing overhead | $ | 3 |
Variable selling and administrative | $ | 3 |
Fixed costs per year: | ||
Fixed manufacturing overhead | $ | 380,000 |
Fixed selling and administrative | $ | 290,000 |
During the year, the company produced 38,000 units and sold 18,000 units. The selling price of the company’s product is $61 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.