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		$ 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
Total selling and administrative 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

b.	Prepare an income statement for the year.