EXERCISE $5-5$ Variable and Absorption Costing Unit Product Costs and Income Statements $[$LO$1,$

LO$2]$

Lynch Company manufactures and sells a single product. The following costs were incurred during

the company's first year of operations:

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:

Assume that the company uses absorption costing:

a$.$ Compute the unit product cost.

b$.$ Prepare an income statement for the year.

Assume that the company uses variable costing:

a$.$ Compute the unit product cost.

b$.$ Prepare an income statement for the year.