Question - Lynch Company manufactures and sells a single product. The following costs were incurred during the company's first year of operations:
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Variable costs per unit:
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Manufacturing:
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Direct materials
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$19
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Direct labor
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$9
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Variable manufacturing overhead
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$3
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Variable selling and administrative
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$4
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Fixed costs per year:
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Fixed manufacturing overhead
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$202,400
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Fixed selling and administrative
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$65,000
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During the year, the company produced 18,400 units and sold 15,200 units. The selling price of the company's product is $65 per unit.
Requirement 1: Assume that the company uses absorption costing:
(a) Compute the unit product cost.
(b) Prepare an income statement for the year.
Requirement 2: Assume that the company uses variable costing:
(a) Compute the unit product cost.
(b) Prepare an income statement for the year.