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 Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead $ 11 $ 5 $ 2 $ 2 $ 350,000 $ 260,000 Fixed selling and administrative During the year, the company produced 35,000 units and sold 25,000 units. The selling price of the company's product is $46 per unit. Required: 1. Assume that the company uses absorption costing: a. Compute the unit product cost. Unit product cost $ 28 b. Prepare an income statement for the year. Lynch Company Absorption Costing Income Statement Sales $ 1,150,000 Cost of goods sold Gross margin Total selling and administrative expense 1,150,000 Net operating income $ 1,150,000 2. Assume that the company uses variable costing: a. Compute the unit product cost. Unit product cost 18 b. Prepare an income statement for the year. Lynch Company Variable Costing Income Statement Sales $ 1,150,000 Variable expenses: Variable cost of goods sold Beginning merchandise inventory Variable selling and administrative expense 0 1,150,000 Fixed expenses: 0 $ 1,150,000