2 Exercise 7-6 (Algo) Variable and Absorption Costing Unit Product Costs and Income Statements [LO7-1, L07-2] 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 Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative $10 $5 $1 $1 $385,000 $ 295,000 During the year, the company produced 35,000 units and sold 17,000 units. The selling price of the company's product is $58 per unit. 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.