Question - Lynch Company manufactures and sells a single product. The following costs were incurred during the company first year of operations:
Variable costs per unit:
Manufacturing:
Direct materials - $11
Direct labor - $4
Variable manufacturing overhead - $1
Variable selling and administrative - $1
Fixed costs per year:
Fixed manufacturing overhead - $308,000
Fixed selling and administrative - $210,000
During the year, the company produced 28,000 units and sold 24,000 units. The selling price of the company's product is $41 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 casting:
a. Compute the unit product cost.
b. Prepare an income statement for the year.