21. Lynch Company manufactures and sells a single product. The following costs w

Question

21. Lynch Company manufactures and sells a single product. The following costs were incurred company's first year of operations Variable costs per unit Manufacturing Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative s 13 $ 5 $ 1 $ 1 Fixed costs per year Fixed manufacturing overhead Fixed selling and administrative $ 320,000 $230,000 During the year, the company produced 32,000 units and sold 17,000 units. The selling price of the company's product is $53 per unit. Required: 1. Assume that the company uses absorption costing a. Compute the unit product cost Unit product cost

Explanation / Answer

a)Unit product cost under absorption costing = DM+DL+VOH +FOH

                        = 13+5+1 + (320000/32000)

                         = 13+5+1 + 10

                         =$ 29 PER UNIT

b)Income statement under absorption costing

2)Unit product cost under variable cost = 13 +5+ 1 = 19

b)

sales    (17000*53) 901000 less:cost of goods sold (29*17000) 493000 Gross margin 408000 Less:period cost   [230000+ (1*17000) = 230000+17000] -247000 net operating income 161000

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