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	$ 14
Direct labor	$ 5
Variable manufacturing overhead	$ 1
Variable selling and administrative	$ 1
Fixed costs per year:
Fixed manufacturing overhead	$ 264,000
Fixed selling and administrative	$ 174,000

During the year, the company produced 33,000 units and sold 15,000 units. The selling price of the companys product is $52 per unit.

Required:

1. Assume that the company uses absorption costing:
   1. Compute the unit product cost.
   2. Prepare an income statement for the year.
2. Assume that the company uses variable costing:
   1. Compute the unit product cost.
   2. Prepare an income statement for the year.

Complete this question by entering your answers in the tabs below.

• 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
Cost of goods sold
Gross margin	0
Selling and administrative expense
Net operating income	$0

Prepare an income statement for the year. Assume that the company uses variable costing

Lynch Company
Variable Costing Income Statement
Sales
Variable expenses:
Variable cost of goods sold
Fixed selling and administrative
		0
Contribution margin		0
Fixed manufacturing overhead
Fixed selling and administrative
		0
Net operating income		$0