Lynch Company manufactures and sells a single product. The following costs were
ID: 2585294 • Letter: L
Question
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 Direct labor Variable manufacturing overhead Variable selling and administrative S 11 $5 $ 2 $ 2 Fixed costs per year Fixed manufacturing overhead Fixed selling and administrative $ 264,000 $174,000 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. Unit product cost b. Pre pare an inco me statement for the year. Lynch Company Absorption Costing Income Statement 0 0Explanation / Answer
Answer:- 1-a)-
Unit fixed manufacturing overhead= fixed manufacturing overhead/No. of units produced
=$264000/22000 units =$12 per unit
Unit product cost under Absorption costing:-Direct materials + Direct Labor+Variable manufacturing overhead + fixed manufacturing overhead
=$11+$5+$2+$12 = $30 per unit
1-b)-
2-a)-Unit product cost under variable costing:-Direct materials + Direct Labor+Variable manufacturing overhead
=$11+$5+$2 = $18 per unit
b)-
Lynch Company Income statement using Absorptioncosting Particulars Amount $ Sales (a) 18000 units*$45 per unit 810000 Less:- Variable cost of goods sold (b) Opening inventory NIL Add:- Variable cost of goods manufatured 22000 units*30 per unit 660000 Variable cost of goods available for sale 660000 Less:- Closing inventory 4000 units*$30 per unit 120000 540000 Gross contribution margin C= a-b 270000 Less:-Variable selling & administaion cost 18000 units*$2 per unit 36000 Contribution margin 234000 Less:- Period Expenses Fixed Selling & Administrative overhead 174000 Net Opreating Income 60000Related Questions
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