Chapter 6 Graded Exercises Help Save& Exit Submit 5 Lynch Company manufactures a
ID: 2602805 • Letter: C
Question
Chapter 6 Graded Exercises Help Save& Exit Submit 5 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: points Manufacturing: Direct materials Direct labor s 10 Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Hint Fixed manufacturing overhead $380,808 Fixed selling and administrative expenses $298,00 During the year, the company produced 38,000 units and sold 18,000 units. The selling price of the company's product is $61 per unit 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: the unit product cost. b. Prepare an statement for the year Complete this question by entering your answers in the tabs below Req 1A Req 1B Req 2A Req 2B 11:12 AM Type here to searchExplanation / Answer
1A) Under absorption costing, fixed manufacturing overhead is considered as product cost whereas in variable costing fixed manufacturing overhead is considered as period cost. The calculation of unit product cost under absorption costing is shown as follows:-
Fixed manufacturing overhead per unit = (Fixed manufacturing overheads/units produced)
= $380,000/38,000 = $10 per unit
Total Unit product cost = Total variable manufacturing cost + Fixed manufacturing overhead per unit
= $10+$7+$3+$10 = $30
1B) Lynch Company
Absorption costing income statement (Amount in $)
2A) As in the variable costing method only variable manufacturing cost is included in unit product cost, the calculation of unit product cost is shown as follows:-
Total Unit product cost = Total variable manufacturing cost = $10+$7+$3 = $20
2B) Lynch Company
Absorption costing income statement (Amount in $)
Sales (18,000 units*$61 per unit) 1,098,000 Less: Cost of goods sold (18,000*$30) (540,000) Gross Profit 558,000 Less: Total selling and administrative cost [(18,000*$3)+$290,000] (variable and fixed) (344,000) Net Profit 214,000Related Questions
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