Lynch Company manufactures and sells a single product. The following costs were
ID: 2541163 • Letter: L
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 31,000 units and sold 21,000 units. The selling price of the company’s product is $44 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.
Lynch Company manufactures and sells a single product. The following costs were incurred during the company’s first year of operations:
Variable costs per unit: Manufacturing: Direct materials $ 12 Direct labor $ 7 Variable manufacturing overhead $ 2 Variable selling and administrative $ 2 Fixed costs per year: Fixed manufacturing overhead $ 248,000 Fixed selling and administrative $ 158,000During the year, the company produced 31,000 units and sold 21,000 units. The selling price of the company’s product is $44 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.
Lynch Company Variable Costing Income Statement Variable expenses: 0 0 Fixed expenses: 0 $0Explanation / Answer
Absorption Costing:
Unit product cost
Income Statement
Variable Costing:
Reconciliation
Cost of goods sold: Per unit Cost Direct Material 21,000 12.00 Direct Labour 21,000 7.00 Variable manufacturing overhead 21,000 2.00 Annual fixed manufacturing overhead 21,000 8.00 Unit Product Cost 29.00Related Questions
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