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

ID: 2589542 • Letter: L

Question

Lynch Company manufactures and sells a single product. The following costs were incurred during the company’s first year of operations:

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.

Prepare an income statement for the year.

Lynch Company manufactures and sells a single product. The following costs were incurred during the company’s first year of operations:

Absorption costing

A. Unit product cost = 13+5+1+(320000/32000) = 29

B. Income statement

Sales (17000*53) 901000

Cost of goods sold (17000*29) 510000

Gross margin 408000

Selling and administrative expnese (230000+(17000*1) 247000

Net operating income 161000

Variable costing

A. Unit product cost= 13+5+1+1=20

B. Income statement

Sales (17000*53) 901000

Less: Variable expense:

Variable cost of goods sold (17000*19) 323000

Variable selling expense (17000*1) 17000 340000

Contribution margin 561000

Less: fixed expenses:

Fixed Manufacturing overhead 320000

Fixed selling and administrative expenses 230000 550000

Net operating income 11000

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