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

*PLEASE ONLY ANSWER 2 B*

Variable costs per unit:
Manufacturing:
Direct materials	$13
Direct labor	$7
Variable manufacturing overhead	$1
Variable selling and administrative	$1
Fixed costs per year:
Fixed manufacturing overhead	$288,000
Fixed selling and administrative	$198,000

During the year, the company produced 24,000 units and sold 20,000 units. The selling price of the companys product is $48 per unit.

Required:

1. Assume that the company uses absorption costing:

a. Compute the unit product cost.

Unit product cost

$33

b. Prepare an income statement for the year.

Lynch Company
Absorption Costing Income Statement
Sales	$960,000
Cost of goods sold	$660,000
Gross margin	$300,000
Selling and admin. expense	$218,000
Net operating income	$82,000

2. Assume that the company uses variable costing:

a. Compute the unit product cost.

Unit product cost

$21

*Need help with 2 B*

b. Prepare an income statement for the year.

Lynch Company
Variable Costing Income Statement
Sales		$960,000
Variable expenses
Variable cost of goods sold	$420,000
Variable selling and admin expense	$20,000
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