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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:

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 $ 10
Direct labor $ 5
Variable manufacturing overhead $ 1
Variable selling and administrative $ 1
Fixed costs per year:
Fixed manufacturing overhead $ 385,000
Fixed selling and administrative $ 295,000
During the year, the company produced 35,000 units and sold 17,000 units. The selling price of the companys product is $58 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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