Lynch Company manufactures and sells a single product. Thefollowing costs were incurred during the companyâs first year ofoperations:
Variable costs per unit: Manufacturing: Directmaterials $ 10 Direct labor $ 4 Variablemanufacturing overhead $ 1 Variable sellingand administrative $ 1 Fixed costs per year: Fixed manufacturing overhead $231,000 Fixed selling and administrative $141,000
During the year, the company produced 21,000 units and sold17,000 units. The selling price of the companyâs product is $40 perunit.
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. Thefollowing costs were incurred during the companyâs first year ofoperations:
| Variable costs per unit: | ||
| Manufacturing: | ||
| Directmaterials | $ 10 | |
| Direct labor | $ 4 | |
| Variablemanufacturing overhead | $ 1 | |
| Variable sellingand administrative | $ 1 | |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $231,000 | |
| Fixed selling and administrative | $141,000 | |
During the year, the company produced 21,000 units and sold17,000 units. The selling price of the companyâs product is $40 perunit. |
| 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. |
Related questions
Exercise 6-6 Variable and Absorption Costing Unit Product Costsand Income Statements [LO6-1, LO6-2]
Lynch Company manufactures and sells a single product. Thefollowing costs were incurred during the companyâs first year ofoperations: |
| Variable costs perunit: | ||
| Manufacturing: | ||
| Directmaterials | $ 10 | |
| Direct labor | $ 4 | |
| Variablemanufacturing overhead | $ 2 | |
| Variable sellingand administrative | $ 2 | |
| Fixed costs peryear: | ||
| Fixedmanufacturing overhead | $374,000 | |
| Fixedselling and administrative | $284,000 | |
During the year, the company produced 34,000 units and sold26,000 units. The selling price of the companyâs product is $44 perunit. |
| Required: |
| 1. | Assume that the company usesabsorption costing: |
| a. | Compute the unit productcost. |
| b. | Prepare an income statement for the year. |
| 2. | Assume that the company usesvariable costing: |
| a. | Compute the unit productcost. |
| b. | Prepare an income statement for the year. |
Lynch Company manufactures and sells a single product. Thefollowing costs were incurred during the companyâs first year ofoperations: |
| Variable costs perunit: | ||
| Manufacturing: | ||
| Directmaterials | $ 13 | |
| Direct labor | $ 7 | |
| Variablemanufacturing overhead | $ 1 | |
| Variable sellingand administrative | $ 1 | |
| Fixed costs peryear: | ||
| Fixedmanufacturing overhead | $288,000 | |
| Fixedselling and administrative | $198,000 | |
During the year, the company produced 24,000 units and sold20,000 units. The selling price of the companyâs product is $48 perunit. |
| Required: |
| 1. | Assume that the company usesabsorption costing: |
| a. | Compute the unit productcost. |
| b. | Prepare an income statement for the year. |
| 2. | Assume that the company usesvariable costing: |
| a. | Compute the unit productcost. |
| b. | Prepare an income statement for the year. |
