Question

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 Fixed selling and administrative $ $ $ $ 10 7 3 3 $380,000 $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 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. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2A Req 2B

Answer 1

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Sc с D E F G ] K L 10 7 10 H H 1 Variable costing 3 Direct Materials Direct labor Variable manufacturing overhead Unit product cost 3 7 3 3 20 380000 290000 38000 Units sold 18000 SP 61 Amount 1098000 IA B 1 Direct Materials 2 Direct labot 3 V.M.OH 4 4. V.S&D 5 F.M.OH 6 FS&D 7 Units produced 8 9 Absorption Costing 10 1 Direct Materials 11 Direct labor Variable manufacturing overhead 13 Fixed manufacturing overhead per unit 14 Unit product cost under absorption costing 15 16 2 Income statement 17 Sales 18 Costs of goods sold 19 Gross income 20 Total selling and administrative expenses 21 V.S&D 22 FS&D 23 Net operating income 24 10 7 3 101 Income statement Sales Variable expenses: Direct Materials Direct labor Variable manufacturing overhead Variable selling and administrative expenses Total variable expenses Contribution margin Fixed Expenses Fixed selling and administrative expenses Fixed manufacturing overhead Net income under variable costing 180000 126000 54000 54000 12 30 4140001 684000 Amount 1098000 540000 290000 380000 670000 558000 14000 54000 290000 344000 214000 25

For calculation ref:

А B с D E F K 1 10 2 Direct Materials Direct labot V.M.OH G H Variable costing 3 Direct Materials Direct labor Variable manufacturing overhead Unit product cost =D10 =D11 7 3 3 380000 3 4 V.S&D =D12 5 =SUM(K2:K4) F.M.OH FS&D Units produced 6 7 8 290000 38000 Units sold 18000 SP 61 Amount =F7*F8 4 Income statement Sales Variable expenses: =12 =13 =K2*F$7 1=K3*F$7 =K4*F$7 =F7*D4 =SUM(J10:13) =K8-K14 9 Absorption Costing 10 1 Direct Materials =D1 11 Direct labor =D2 12 Variable manufacturing overhead 1=D3 13 Fixed manufacturing overhead per unit =D5/D7 14 Unit product cost under absorption costing =SUM(D10:013) 15 16 2 Income statement Amount 17 Sales =F7*F8 18 Costs of goods sold =F7*D14 19 Gross income =D17-D18 20 Total selling and administrative expenses 21 =B4 =F7D4 22 =B6 =D6 =SUM(C21:C22) 23 Net operating income =D19-D21-D22 24 =14 Variable selling and administrative expenses Total variable expenses Contribution margin Fixed Expenses Fixed selling and administrative expenses Fixed manufacturing overhead Net income under variable costing =D6 =D5 =SUM(J17:J18) =K15-K17-K18 25 26 RENSheet182 Sheet183 Sheet184 Sheet185 Sheet186 Sheet187 Sheet188 Stats IIII nondum PRA nm 1000