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 22,000 units and sold 18,000 units. The selling price of the company’s product is $45 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 $ 11 Direct labor $ 5 Variable manufacturing overhead $ 2 Variable selling and administrative $ 2 Fixed costs per year: Fixed manufacturing overhead $ 264,000 Fixed selling and administrative expenses $ 174,000 5 Lynch Company manufactures and sells a single product. The following costs were incurred during the company's first year of operations: points Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year eBook Fixed manufacturing overhead Fixed selling and administrative expenses $264,000 $174,000 Hint During the year, the company produced 22,000 units and sold 18,000 units. The selling price of the company's product is $45 per unit. Print 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 References Complete this question by entering your answers in the tabs below Req 1A Req 1B Req 2A Req 2B Prepare an income statement for the year. Assume that the company uses absorption costing Lynch Company Absorption Costing Income Statement K Req 1A Req 2A >

Explanation / Answer

SOLUTION

(1A) Unit product cost under absorption costing-

(1B) The absorption costing income statement-

(2A) Unit product cost under variable costing-

(2B) The variable costing income statement-

Amount ($) Direct materials 11 Direct labor 5 Variable manufacturing overhead 2 Fixed manufacturing overhead ($264,000 / 22,000) 12 Absorption costing unit product cost 30

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