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Lynch Company - absorption and variable costing - 23 Apr, 2020

EXERCISE 6–6 Variable and Absorption Costing Unit Product Costs and Income Statements

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:

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.



Category : Management Accounting

Search Keywords :
Lynch , Absorption , Variable , Costing , Unit , First , Year 


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Answer  - 23 Apr, 2020
Please see the excel attachment....


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