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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 | $ 5 |
| Variable manufacturing overhead | $ 1 |
| Variable selling and administrative | $ 1 |
| Fixed costs per year: | |
| Fixed manufacturing overhead | $ 385,000 |
| Fixed selling and administrative | $ 295,000 |
During the year, the company produced 35,000 units and sold 17,000 units. The selling price of the companys product is $58 per unit.
Required:
- Assume the company uses absorption costing:
- Compute the unit product cost.
- Prepare an income statement for the year.
- Assume the company uses variable costing:
- Compute the unit product cost.
- Prepare an income statement for the year.
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