### Lynch Company's Cost Analysis for the First Year of OperationsLynch Company manufactures and sells a single product. Below is a breakdown of the costs incurred during the company’s first year of operations:**Variable Costs per Unit:**- **Manufacturing:** - Direct materials: $14 - Direct labor: $3 - Variable manufacturing overhead: $1- **Variable Selling and Administrative:** $1**Fixed Costs per Year:**- Fixed manufacturing overhead: $330,000- Fixed selling and administrative: $240,000**Production and Sales Data:**- Units produced during the year: 33,000- Units sold during the year: 24,000- Selling price per unit: $44### Required Calculations and Statements:1. **Absorption Costing Method:** a. Compute the unit product cost. b. Prepare an income statement for the year.2. **Variable Costing Method:** a. Compute the unit product cost. b. Prepare an income statement for the year.### Explanation of Graphs and Diagrams:This document does not contain any graphs or diagrams. All information is presented in a tabular form for clarity and ease of understanding. The data is structured to delineate the variable and fixed costs separately, and specific instructions are provided for calculating unit product costs and income statements using two different costing methods. **Income Statement Preparation****Task Instructions:**1. **Prepare an Income Statement:** For Lynch Company, create an income statement for the year based on variable costing. **Graph Description:**Below is a placeholder for the income statement, with blank fields indicating where specific financial figures should be inputted. The document is structured as follows:1. **Revenue/Sales:** The top row is reserved for total sales revenue.2. **Variable Costs:** - Cost of Goods Sold (COGS) - Variable Selling Expenses - Variable Administrative Expenses3. **Contribution Margin:** Calculated as Sales minus Total Variable Costs.4. **Fixed Costs:** - Fixed Manufacturing Overhead - Fixed Selling Expenses - Fixed Administrative Expenses5. **Operating Income:** Calculated as Contribution Margin minus Total Fixed Costs.**Variable Costing Income Statement Template for Lynch Company**:| Description | Amount | Amount ||-----------------------------------|----------|---------|| **Lynch Company** | | || **Variable Costing Income Statement** | | || Sales Revenue | | || Less: Variable Costs | | || - Cost of Goods Sold (COGS) | | || - Variable Selling Expenses | | || - Variable Administrative Expenses| | || **Total Variable Costs** | 0 | || **Contribution Margin** | 0 | || Less: Fixed Costs | | || - Fixed Manufacturing Overhead | | || - Fixed Selling Expenses | | || - Fixed Administrative Expenses | | || **Total Fixed Costs** | 0 | || **Operating Income** | 0 | $0 |**Instructions for Users:**- Enter the respective financial figures for the year in the provided blanks under each category.- Ensure that you calculate the totals accurately, particularly the Contribution Margin and Operating Income, which are key indicators of the firm's profitability using the variable costing method.- The contribution margin is a critical figure as it shows the excess of sales over variable costs, providing insight into the company’s cost structure and profitability.**Graph Explanation:**This income statement template uses the variable costing method which focuses on variable costs linked directly to production, and separates them from fixed costs which

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Description: ### Lynch Company's Cost Analysis for the First Year of OperationsLynch Company manufactures and sells a single product. Below is a breakdown of the costs incurred during the company’s first year of operations:**Variable Costs per Unit:**- **Manufac

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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 2$ 2$ 2$ 14 Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative 1 1 $330,000 $240,000 During the year, the company produced 33,000 units and sold 24,000 units. The selling price of the company's product is $44 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.

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 2$ 2$ 2$ 14 Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative 1 1 $330,000 $240,000 During the year, the company produced 33,000 units and sold 24,000 units. The selling price of the company's product is $44 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

Section: Chapter Questions

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