Reference no: EM132560363

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$12

Direct labor$5

Variable manufacturing overhead$1

Variable selling and administrative$1

Fixed costs per year:

Fixed manufacturing overhead$360,000

Fixed selling and administrative$270,000

During the year, the company produced 36,000 units and sold 18,000 units. The selling price of the company's product is $55 per unit.

Required:

Question 1. Assume that the company uses absorption costing:

a. Compute the unit product cost.

b. Make an income statement for the year.

Question 2. Assume that the company uses variable costing:

a. Compute the unit product cost.

b. Make an income statement for the year.