Question 1: A 10% decease in the selling price of a product will have the same impact on net income as a 10% increase in the variable expenses. I need help understanding these questions. It's asking if I agree or disagree.
Question 2: Variable and Absorption Costing Unit Product Costs and Income Statements.
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:
Direct materials.............................. $6
Direct labor................................. $9
Variable manufacturing overhead......... $3
Variable selling and administrative...................$4
Fixed costs per year:
Fixed manufacturing overhead............... $300,000
Fixed selling and administrative...............$190,000
During the year, the company produced 25,000 units and sold 20,000 units. The selling price of the company's product is $50 per unit.
Required:
1. Assume that the company uses the absorption costing method:
a. Compute the unit product cost.
b. Prepare an income statement for the year.
2. Assume that the company uses the variable costing method:
a. Compute the unit product cost.
b. Prepare an income statement for the year.