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 . . . . . . . . . . . . . . . . . . . . . . . . . . . $6 Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9 Variable manufacturing overhead . . . . . . . . . . . $3 Variable selling and administrative . . . . . . . . . . . . . . . $4 Fixed costs per year: Fixed manufacturing overhead . . . . . . . . . . . . . . . . $300,000 Fixed selling and administrative . . . . . . . . . . . . . . . $190,000

During the year, the company produced 25,000 units and sold 20,000 units. The selling price of the companys product is $50 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.