Lynch Company manufactures and sells a single product. The following costs were incurred during the company’s...

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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	$12
Direct labor	$9
Variable manufacturing overhead	$2
Variable selling and administrative	$2
Fixed costs per year:
Fixed manufacturing overhead	$403000
Fixed selling and administrative	$313000

During the year, the company produced 31,000 units and sold 26,000 units. The selling price of the company’s product is $55 per unit.

Assume that the company uses variable costing:

a. Compute the unit product cost.

Unit product cost

b. Prepare an income state for the year

Lynch Company Variable Costing Income Statement Variable expenses Fixed expenses

business accounting

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Answer 1

Answer #1

Variable unit cost = direct materials (12) + Direct labor (9) + variable manufacturing overhead (2) = 23

Income Statement for the year

Sales	26000	55	1430000
less: variable cost	26000	23	598000
less: variable selling and admisnistrative cost	26000	2	52000
Contribution			780000
Less: Fixed Selling and admisnitrative expence			313000
Less: Fixed MOH			403000
NET PROFIT			64000

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Answer 2

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