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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 | $ | 12 |
| Direct labor | $ | 3 |
| Variable manufacturing overhead | $ | 1 |
| Variable selling and administrative | $ | 1 |
| Fixed costs per year: | | |
| Fixed manufacturing overhead | $ | 324,000 |
| Fixed selling and administrative expenses | $ | 234,000 |
| |
During the year, the company produced 27,000 units and sold 23,000 units. The selling price of the companys product is $42 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.
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