Reference no: EM131579796

Question - Variable and Absorption Costing Unit Product Costs and Income Statements

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 $ 11  

Direct labor $ 8     

Variable manufacturing overhead $ 1

Variable selling and administrative $ 1  

Fixed costs per year:

Fixed manufacturing overhead$ 420,000   

Required: 1. Assume that the company uses absorption casting:

a. Compute the unit product cost.

b. Prepare an income statement for the year.

2. Assume that the company uses variable casting:

a. Compute the unit product cost.

b. Prepare an income statement for the year.