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.