Exercise 7-6 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 $350,000 $260,000 Fixed selling and administrative During the year, the company produced 35,000 units and sold 25,000 units. The selling price of the company's product is $46 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