Exercise $7-6($Algo$)$ Variable and Absorption Costing Unit Product Costs and Income Statements $[$LO$7-1,$ LO$7-2]$

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 $ $12$

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 company$$s product is $$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.