Exercise 4-6 (Static) Variable and Absorption Costing Unit Product Costs and Income Statements (L04-1, LO4-2) 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 sanufacturing overhead Fixed selling and administrative $6 $9 $3 $4 $ 300,000 $ 190,00 During the year, the company produced 25,000 units and sold 20.000 units. The selling price of the company's product is $50 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 Prepare an income statement for the year. Assume that the company uses variable costing $ 1,000,000 Lynch Company Variable Costing Income Statement Sales Variable expenses: Variable cost of goods sold $ 360,000 Variable selling expense 80,000 Depreciation Beginning merchandise inventory Contribution margin Fixed expenses: Purchases Beginning merchandise inventory Fixed manufacturing overhead 300,000 Fixed selling and administrative expense 190,000 Net operating income 440,000 560,000 490,000 70.000 $ |