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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 | | $ 1 |
| Variable selling and administrative | | $ 1 |
| Fixed costs per year: | | |
| Fixed manufacturing overhead | $ 231,000 |
| Fixed selling and administrative | $ 141,000 |
| |
During the year, the company produced 21,000 units and sold 17,000 units. The selling price of the companys product is $40 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.
| |
| | | Lynch Company | | Absorption Costing Income Statement | | | | | | | | | | | | | | | | |
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: | | | | | | | | | | | | | | | | | | | | | | | | Fixed expenses: | | | | | | | | | | | | | | | | | | | | | | | |
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