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: $1

Direct labor: $3

Variable manufacturing overhead: $1

Variable selling and administrative: $1

Fixed costs per year

Fixed manufacturing overhead: $330,000

Fixed selling and administrative: $240,000

During the year, the company produced 30,000 units and sold 23,000 units. The selling price of the companys product is $43 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.