Question

Lynch Company manufactures and sells a single product. The following costs were incurred during the company's first year of operations: olnts Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative Рел о eBook $320,000 $230,000 Hint During the year, the company produced 32,000 units and sold 17,000 units. The selling price of the company's product is $53 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. Reg 1A Reg 1B Reg 2A Req 2B Compute the unit product cost. Assume that the company uses absorption costing. Unit product cost < Req1A Req 1B >

Answer 1

1a
Direct materials	13
Direct labor	5
Variable manufacturing overhead	1
Fixed manufacturing overhead	10		=320000/32000
Unit product cost	29
b
Absorption Costing Income Statement
Sales	901000		=17000*53
Cost of goods sold	493000		=17000*29
Gross margin	408000
Selling and administrative expenses	247000		=230000+(17000*1)
Net operating income (loss)	161000
2a
Direct materials	13
Direct labor	5
Variable manufacturing overhead	1
Unit product cost	19
b
Variable Costing Income Statement
Sales		901000	=17000*53
Variable expenses:
Variable Cost of goods sold	323000		=17000*19
Variable Selling and administrative expenses	17000		=17000*1
		340000
Contribution margin		561000
Fixed expenses:
Fixed manufacturing overhead	320000
Fixed Selling and administrative expenses	230000
		550000
Net operating income (loss)		11000