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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 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.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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: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
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.
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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