Saved Help Save & (CH 5 & 6) Lynch Company manufactures and sells a single produ
ID: 2396101 • Letter: S
Question
Saved Help Save & (CH 5 & 6) 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 15 Direct materials Direct labor 27:44 Variable manufacturing overhead Variable selling and administrative Fixed costs per year Fixed mahufacturing overhead Fixed selling and administrative expenses $286,800 $196,808 During the year, the company produced 26.000 units and sold 22 000 units. The selling price of the company's product is $46 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 Dan 14 Dan , K Prev 2 of 27 Next Ea e @ Connect-Google Ch." ?AVG AntiVirusExplanation / Answer
1A
Calculation of Unit Product Cost
Details
Cost per unit
Direct material Per unit
$ 15.00
Direct labor
$ 5.00
Variable Manufacturing Overheads
$ 1.00
Fixed manufacturing Overheads (286000/26000)
$ 11.00
Total Cost per unit
$ 32.00
1B
Income Statement (Absorption Costing)
Sales
$ 1,012,000.00
Cost of Goods sold (32*22000)
$ 704,000.00
Gross Profit
$ 308,000.00
Operating Expenses
Selling and Administrative expenses*
$ 218,000.00
Net Income
$ 90,000.00
* Fixed selling expenses ($ 196000 + Variable $ 1 per unit sold ) $218000
2A
Calculation of Unit Product Cost
Cost per unit
Direct material Per unit
15
Direct labor
5
Variable Manufacturing Overheads
1
Variable selling and Administrative cost
1
(A) Total Variable cost per unit
22
Fixed cost per unit
Fixed Selling and Administrative expenses
8.91
Fixed Manufacturing Expenses
13.00
(B) Total Fixed Cost per Unit
21.91
(A +B)Total Product cost
43.91
2B
Income Statement (Marginal Costing)
Sales
$ 1,012,000.00
Variable cost
$ 484,000.00
Contribution Margin
$ 528,000.00
Less: Fixed Costs
Fixed Selling and Administrative expenses
$ 196,000.00
Fixed Manufacturing Expenses
$ 286,000.00
Net Income
$ 46,000.00
Note 1- The difference between profit as per marginal costing and absorption costing is due to closing finished inventory of 4000 units at 11 per unit.
Note 2- In absorption costing variable selling expenses are not considered as product cost.
1A
Calculation of Unit Product Cost
Details
Cost per unit
Direct material Per unit
$ 15.00
Direct labor
$ 5.00
Variable Manufacturing Overheads
$ 1.00
Fixed manufacturing Overheads (286000/26000)
$ 11.00
Total Cost per unit
$ 32.00
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