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Exercise 6-6 Variable and Absorption Costing Unit Product Costs and Income Statements [LO6-1, LO6-2] Lynch Company...

Exercise 6-6 Variable and Absorption Costing Unit Product Costs and Income Statements [LO6-1, LO6-2]

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 $ 13
        Direct labor $ 5
        Variable manufacturing overhead $ 1
        Variable selling and administrative $ 1
  Fixed costs per year:
    Fixed manufacturing overhead $ 320,000
    Fixed selling and administrative $ 230,000

    

During the year, the company produced 32,000 units and sold 17,000 units. The selling price of the company’s product is $53 per unit.

    

Required:
1. Assume that the company uses absorption costing:

    

a.

Compute the unit product cost.

Unit product cost
b.

Prepare an income statement for the year.

Lynch Company
Absorption Costing Income Statement
2. Assume that the company uses variable costing:

   

a.

Compute the unit product cost.

Unit product cost
b.

Prepare an income statement for the year.

Lynch Company
Variable Costing Income Statement
Variable expenses:
Fixed expenses:

Solutions

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