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 Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative $6 $9 $3 $4 $ 300,000 $ 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.
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 Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative $6 $9 $3 $4 $ 300,000 $ 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Prepare an income statement for the year. Assume that the company uses v
Lynch Company
Variable Costing Income Statement
$ 1,000,000
Sales
Variable expenses:
360,000
Variable cost of goods sold
80,000
Variable selling expense
440,000
560,000
Contribution margin
560.000
%24
%24
Transcribed Image Text: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
$9
Direct labor
Variable manufacturing overhead
Variable selling and administrative
Fixed costs per year:
Fixed manufacturing overhead
Fixed selling and administrative
$3
$4
$ 300,000
$ 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.
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