Question
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:
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 $ 14
Direct labor $ 3
Variable manufacturing overhead $ 1
Variable selling and administrative $ 1
Fixed costs per year: Fixed manufacturing overhead $ 290,000 Fixed selling and administrative $ 200,000 During the year, the company produced 29,000 units and sold 22,000 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.
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