Exercise 6-6 (Algo) Variable and Absorption Costing Unit Product Costs and Income Statements [LO6-1, LO6-2]

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$ 12Direct labor$ 6Variable manufacturing overhead$ 3Variable selling and administrative$ 3Fixed costs per year:Fixed manufacturing overhead$ 276,000Fixed selling and administrative$ 186,000

During the year, the company produced 23,000 units and sold 19,000 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.