Lynch Company manufactures and sells a single product. The following costs were
ID: 2550145 • 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 27,000 units and sold 23,000 units. The selling price of the company’s product is $42 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 $ 12 Direct labor $ 3 Variable manufacturing overhead $ 1 Variable selling and administrative $ 1 Fixed costs per year: Fixed manufacturing overhead $ 324,000 Fixed selling and administrative expenses $ 234,000Explanation / 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 12 Direct labour 3 Variable manufacturing overhead 1 Fixed manufacturing overhead (324000/27000) 12 Total unit product cost 28Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.