Exercise 6-6 Variable and Absorption Costing Unit Product Costs and Income State
ID: 2536766 • Letter: E
Question
Exercise 6-6 Variable and Absorption Costing Unit Product Costs and Income Statements [LO6-1, LO6-2] 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 $ 13 $ 10 $3 $3 Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative $352,000 $ 262,000 During the year, the company produced 32,000 units and sold 27,000 units. The selling price of the company's product is $56 per unit. Required: 1. Assume that the company uses absorption costing a. Compute the unit product cost. nit product cost$ 37 b. Prepare an income statement for the year Lynch Company Absorption Costing Income Statement ales Cost of goods sold Gross margin $ 1,512,000 999,000 513,000 343,000 $ 170,000 otal selling and administrative expense et operating incomeExplanation / Answer
a Unit product cost=13+10+3+(352000/32000)= $37 b Sales 1512000 =27000*56 Cost of goods sold 999000 =27000*37 Gross margin 513000 Total selling and administrative expense 343000 =262000+(27000*3) Net operating income 170000