Variable costs per unit: Manufacturing: Direct materials $6 $9 Direct labor .... $3 Variable manufacturing overhead Variable selling and administrative.. $4 Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative $300,000 $190,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Variable and Absorption Costing Unit Product Costs and Income Statements

Lynch Company manufactures and sells a single product. The following costs were incurred during the company’s first year of operations:

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.

 

Variable costs per unit:
Manufacturing:
Direct materials
$6
$9
Direct labor ....
$3
Variable manufacturing overhead
Variable selling and administrative..
$4
Fixed costs per year:
Fixed manufacturing overhead
Fixed selling and administrative
$300,000
$190,000
Transcribed Image Text:Variable costs per unit: Manufacturing: Direct materials $6 $9 Direct labor .... $3 Variable manufacturing overhead Variable selling and administrative.. $4 Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative $300,000 $190,000
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