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EXERCISE $4-6$ Variable and Absorption Costing Unit Product Costs and Income Statements L$04-1,$ L$04-2$ 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. $...............\backslash (\backslash$$ $300,000\backslash )$

Fixed selling and administrative $..............\backslash (\backslash$$ $190,000\backslash )$

During the year, the company produced $25,000$ units and sold $20,000$ units. The selling price of the company's product is $\backslash (\backslash$$ $50\backslash )$ 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.