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 $6 Direct labor $9 Variable manufacturing overhead $3 Variable selling and administrative $4 Fixed costs per year: Fixed manufacturing overhead $300,000 Fixed selling and administrative $190,000 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: Compute the unit product cost. Prepare an income statement for the year. Assume that the company uses variable costing: Compute the unit product cost. Prepare an income statement for the year.
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 $6 Direct labor $9 Variable manufacturing overhead $3 Variable selling and administrative $4 Fixed costs per year: Fixed manufacturing overhead $300,000 Fixed selling and administrative $190,000 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: Compute the unit product cost. Prepare an income statement for the year. Assume that the company uses variable costing: Compute the unit product cost. Prepare an income statement for the year.
Chapter5: Process Costing
Section: Chapter Questions
Problem 1PA: The following product Costs are available for Haworth Company on the production of chairs: direct...
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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 | $6 | |
| Direct labor | $9 | |
| Variable manufacturing overhead | $3 | |
| Variable selling and administrative | $4 | |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $300,000 | |
| Fixed selling and administrative | $190,000 |
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:
- Compute the unit product cost.
- Prepare an income statement for the year.
- Assume that the company uses variable costing:
- Compute the unit product cost.
- Prepare an income statement for the year.
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