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 | $ | 11 |
Direct labor | $ | 8 |
Variable manufacturing overhead | $ | 1 |
Variable selling and administrative | $ | 1 |
Fixed costs per year: | ||
Fixed manufacturing overhead | $ | 420,000 |
Fixed selling and administrative | $ | 330,000 |
During the year, the company produced 30,000 units and sold 25,000 units. The selling price of the company’s product is $54 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.
Part-1.a The Absorption Costing Unit Product Cost | |
$ | |
Direct Materiall | $11.00 |
Direct Labour | $8.00 |
Variable Manufacturign Overhead | $1.00 |
Variable Manufacturing cost (a) | $20.00 |
Fixed
Manufacturing overhead cost (420000/30000) |
$14.00 |
Unit Product cost | $34.00 |
Part-b The Absorption Costing Income Statement | |
$ | |
No. of Unit Sold | 25000 |
Sales @$54 | $1,350,000 |
Less: Cost of Goods sold @$34 | $850,000 |
Gross Margin | $500,000 |
Less: Other Expense | |
Variable Selling & Admin cost @$1 | $25,000 |
Fixed Selling & Admin Cost | $330,000 |
Net operating income | $145,000 |
Part-2.a Compuation of Unit Product cost- Variable Costing | |
$ | |
Direct Material | $11.00 |
Direct labour | $8.00 |
Variable Manufacturing overheads | $1.00 |
Variable Product cost | $20.00 |
Part-b: The Variable Costing Income Statement | |
$ | |
No. of Unit Sold | 25000 |
Sales @$54 | $1,350,000 |
Less: Variable cost | |
variable Manaufacturing cost @ $20 | $500,000.00 |
Variable Selling & Admin cost @1 | $25,000.00 |
Contribution margin | $825,000.00 |
Fixed expense: | |
Fixed Manufacturing cost | $420,000.00 |
Fixed Selling & Admin Cost | $330,000.00 |
Net operating Income | $75,000.00 |
Part-d: Reconciliation Statement of Income | |
$ | |
Income under variable costing | $75,000.00 |
Fixed OH
in Inventory (5000X 14) |
$70,000.00 |
Income under Absorption Costing | $145,000.00 |
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Lynch Company manufactures and sells a single product. The following costs were incurred during the company’s...
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 $ 14 Direct labor $ 3 Variable manufacturing overhead $ 1 Variable selling and administrative $ 1 Fixed costs per year: Fixed manufacturing overhead $ 330,000 Fixed selling and administrative $ 240,000 During the year, the company produced 33,000 units and sold 24,000 units. The selling price of the company’s product is $44...
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 $ 13 Direct labor $ 7 Variable manufacturing overhead $ 1 Variable selling and administrative $ 1 Fixed costs per year: Fixed manufacturing overhead $ 288,000 Fixed selling and administrative $ 198,000 During the year, the company produced 24,000 units and sold 20,000 units. The selling price of the company’s product is $48...
Lynch Company manufactures and sells a single product. The following costs were incurred during the company's first year of operations: Variable conta per uniti Manufacturing Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Pixed costs per year. Fixed manufacturing overhead Fixed selling and administrative $420,000 $330,000 During the year, the company produced 30,000 units and sold 25,000 units. The selling price of the company's product is $54 per unit. Required: 1. Assume that the company uses absorption...
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 $ 3 Variable manufacturing overhead $ 1 Variable selling and administrative $ 1 Fixed costs per year: Fixed manufacturing overhead $ 324,000 Fixed selling and administrative $ 234,000 During the year, the company produced 27,000 units and sold 23,000 units. The selling price of the company’s product is $42...
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 $ 10 Direct labor $ 4 Variable manufacturing overhead $ 1 Variable selling and administrative $ 1 Fixed costs per year: Fixed manufacturing overhead $ 231,000 Fixed selling and administrative $ 141,000 During the year, the company produced 21,000 units and sold 17,000 units. The selling price of the company’s product...
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 $ 11 Direct labor $ 4 Variable manufacturing overhead $ 1 Variable selling and administrative $ 1 Fixed costs per year: Fixed manufacturing overhead $ 308,000 Fixed selling and administrative $ 218,000 During the year, the company produced 28,000 units and sold 24,000 units. The selling price of the company’s product is $41...
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 $ 10 Direct labor $ 4 Variable manufacturing overhead $ 2 Variable selling and administrative $ 2 Fixed costs per year: Fixed manufacturing overhead $ 374,000 Fixed selling and administrative $ 284,000 During the year, the company produced 34,000 units and sold 26,000 units. The selling price of the company’s product is $44...
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 $ 14 Direct labor $ 8 Variable manufacturing overhead $ 2 Variable selling and administrative $ 2 Fixed costs per year: Fixed manufacturing overhead $ 250,000 Fixed selling and administrative $ 160,000 During the year, the company produced 25,000 units and sold 21,000 units. The selling price of the company’s product is $47...
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...
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 $ 10 Direct labor $ 7 Variable manufacturing overhead $ 3 Variable selling and administrative $ 3 Fixed costs per year: Fixed manufacturing overhead $ 380,000 Fixed selling and administrative $ 290,000 During the year, the company produced 38,000 units and sold 18,000 units. The selling price of the company’s product is $61...