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 $ 4 Variable manufacturing overhead $ 1 Variable selling and administrative $ 1 Fixed costs per year:     Fixed manufacturing overhead $ 308,000 Fixed selling and administrative $ 218,000     During the year, the company produced 28,000 units and sold 24,000 units. The selling price of the company’s product is $41 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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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 $ 4
Variable manufacturing overhead $ 1
Variable selling and administrative $ 1
Fixed costs per year:    
Fixed manufacturing overhead $ 308,000
Fixed selling and administrative $ 218,000
 

 

During the year, the company produced 28,000 units and sold 24,000 units. The selling price of the company’s product is $41 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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