Lynch Company manufactures and sells a single product. The following costs were

Question

Lynch Company manufactures and sells a single product. The following costs were incurred during the company’s first year of operations:

During the year, the company produced 38,000 units and sold 18,000 units. The selling price of the company’s product is $61 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.

Variable costs per unit: Manufacturing: Direct materials $ 10 Direct labor $ 7 Variable manufacturing overhead $ 3 Variable selling and administrative $ 3 Fixed costs per year: Fixed manufacturing overhead $ 380,000 Fixed selling and administrative expenses $ 290,000

Explanation / Answer

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.

Direct material 10 Direct labour 7 Variable manufacturing overhead 3 Fixed manufacturing overhead 10 Unit product cost 30

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.