Question

Exercise 6-6 Varieble and Absorption Costing Unit Product Costs and Income Statements (LO6-1, LO6-21 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: Manufagturing: Direft materials Difect labor yariable sanufacturing overhead Variable selling and administrative ixed costs per year: Fixed manufacturing overhead Fixed selling and adeinistrative 15 $ 1 $286,000 $196,eee During the year, the company produced 26,000 units and sold 22,000 units. The selling price of the company's product is $46per unit Required: 1 Assume that the company uses absorp on 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. Complete this question by entering your answers in the tabs below. Req 1A Req 18 Req 2A Req 2B 6 of 6 Next < Prev

Answer 1

1a
Direct materials	15
Direct labor	5
Variable manufacturing overhead	1
Fixed manufacturing overhead	11		=286000/26000
Unit product cost	32
b
Absorption Costing Income Statement
Sales	1012000		=22000*46
Cost of goods sold	704000		=22000*32
Gross margin	308000
Selling and administrative expenses	218000		=196000+(22000*1)
Net operating income (loss)	90000
2a
Direct materials	15
Direct labor	5
Variable manufacturing overhead	1
Unit product cost	21
b
Variable Costing Income Statement
Sales		1012000	=22000*46
Variable expenses:
Variable Cost of goods sold	462000		=22000*21
Variable Selling and administrative expenses	22000		=22000*1
		484000
Contribution margin		528000
Fixed expenses:
Fixed manufacturing overhead	286000
Fixed Selling and administrative expenses	196000
		482000
Net operating income (loss)		46000