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

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 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.

Variable costs per unit: Manufacturing: Direct materials $ 15 Direct labor $ 5 Variable manufacturing overhead $ 1 Variable selling and administrative $ 1 Fixed costs per year: Fixed manufacturing overhead $ 286,000 Fixed selling and administrative expenses $ 196,000

Explanation / Answer

a.

Selling and administrative expenses (both variable and fixed) are not relevant for the computation of unit product cost.

b.

Computation of Unit Product Cost Absorption Costing Direct Meterial $                         15.00 Direct Labour $                            5.00 Variable Manufactoring Overhead $                            1.00 Fixed Manufactoring Overhead ($286,000/26,000) $                         11.00 Unit Product Cost $                         32.00

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.