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Exercise 6-6 Variable and Absorption Costing Unit Product Costs and Income Statements [LO6-1, LO6-2] Lynch Company manufactures and sells a single product. The following costs
Exercise 6-6 Variable and Absorption Costing Unit Product Costs and Income Statements [LO6-1, LO6-2]
Lynch Company manufactures and sells a single product. The following costs were incurred during the companys first year of operations: |
Variable costs per unit: | ||
Manufacturing: | ||
Direct materials | $ 13 | |
Direct labor | $ 5 | |
Variable manufacturing overhead | $ 1 | |
Variable selling and administrative | $ 1 | |
Fixed costs per year: | ||
Fixed manufacturing overhead | $ 320,000 | |
Fixed selling and administrative | $ 230,000 | |
|
During the year, the company produced 32,000 units and sold 17,000 units. The selling price of the companys product is $53 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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