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	$	12
Direct labor	$	3
Variable manufacturing overhead	$	1
Variable selling and administrative	$	1
Fixed costs per year:
Fixed manufacturing overhead	$	324,000
Fixed selling and administrative	$	234,000

During the year, the company produced 27,000 units and sold 23,000 units. The selling price of the companys product is $42 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.