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		$ 12
Direct labor		$ 7
Variable manufacturing overhead		$ 2
Variable selling and administrative		$ 2
Fixed costs per year:
Fixed manufacturing overhead	$ 248,000
Fixed selling and administrative	$ 158,000

During the year, the company produced 31,000 units and sold 21,000 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.

Lynch Company
Variable Costing Income Statement
Variable expenses:
		0
		0
Fixed expenses:
		0
		$0