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 $ 4 Variable manufacturing overhead $ 2 Variable selling and administrative $ 2 Fixed costs per year: Fixed manufacturing overhead $ 374,000 Fixed selling and administrative $ 284,000

During the year, the company produced 34,000 units and sold 26,000 units. The selling price of the companys product is $44 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.

Req 1A Req 1B Reg 2A Req 2B Compute the unit product cost. Assume that the company uses absorption costing. Unit product cost Req 1A Req 1B Req 2A Req 2B Prepare an income statement for the year. Assume that the company uses absorption costing. Lynch Company Absorption Costing Income Statement Sales 0 Cost of goods sold Gross margin Selling and administrative expense Net operating income $ 0 Req 1A Req 1B Req 2A Req 2B Compute the unit product cost. Assume that the company uses variable costing Unit product cost Req 1A Req 1B Reg 2A Req 2B Prepare an income statement for the year. Assume that the company uses variable costin Lynch Company Variable Costing Income Statement Sales Variable expenses: Variable cost of goods sold Variable selling and administrative expense 0 0 Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative 0 Net operating income $ 0