Exercise 4-6 (Algo) Variable and Absorption Costing Unit Product Costs and Income Statements [LO4-1, LO4-2]

Lynch Company manufactures and sells a single product. The following costs were incurred during the companys first year of operations:

Variable costs per unit:
Manufacturing:
Direct materials	$ 12
Direct labor	$ 7
Variable manufacturing overhead	$ 2
Variable selling and administrative	$ 2
Fixed costs per year:
Fixed manufacturing overhead	$ 248,000
Fixed selling and administrative	$ 158,000

During the year, the company produced 31,000 units and sold 21,000 units. The selling price of the companys product is $44 per unit.

Required:

1. Assume that the company uses absorption costing:
   1. Compute the unit product cost.
   2. Prepare an income statement for the year.
2. Assume that the company uses variable costing:
   1. Compute the unit product cost.
   2. Prepare an income statement for the year.