Question

[The following information applies to the questions displayed below.]

O’Brien Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations:

Variable costs per unit:
Manufacturing:
Direct materials	$28
Direct labor	$15
Variable manufacturing overhead	$4
Variable selling and administrative	$3
Fixed costs per year:
Fixed manufacturing overhead	$580,000
Fixed selling and administrative expenses	$180,000

During its first year of operations, O’Brien produced 93,000 units and sold 76,000 units. During its second year of operations, it produced 77,000 units and sold 89,000 units. In its third year, O’Brien produced 81,000 units and sold 76,000 units. The selling price of the company’s product is $80 per unit.

1.

value:
1.00 points

Required information

Required:

1. Assume the company uses variable costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first):

a. Compute the unit product cost for Year 1, Year 2, and Year 3.

b. Prepare an income statement for Year 1, Year 2, and Year 3.

References

eBook & Resources

Financial StatementsLearning Objective: 05-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method.

Difficulty: 3 HardLearning Objective: 05-02 Prepare income statements using both variable and absorption costing.

Ask your instructor a questionCheck my work

2.

value:
1.00 points

Required information

2. Assume the company uses variable costing and a LIFO inventory flow assumption (LIFO means last-in first-out. In other words, it assumes that the newest units in inventory are sold first):

a. Compute the unit product cost for Year 1, Year 2, and Year 3.

b. Prepare an income statement for Year 1, Year 2, and Year 3.

References

eBook & Resources

Financial StatementsLearning Objective: 05-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method.

Difficulty: 3 HardLearning Objective: 05-02 Prepare income statements using both variable and absorption costing.

Ask your instructor a questionCheck my work

3.

value:
1.00 points

Required information

3. Assume the company uses absorption costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first):

a. Compute the unit product cost for Year 1, Year 2, and Year 3. (Round your intermediate calculations and final answers to 2 decimal places.)

b. Prepare an income statement for Year 1, Year 2, and Year 3. (Round your intermediate calculations to 2 decimal places.)

References

eBook & Resources

Financial StatementsLearning Objective: 05-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method.

Difficulty: 3 HardLearning Objective: 05-02 Prepare income statements using both variable and absorption costing.

Ask your instructor a questionCheck my work

4.

value:
1.00 points

Required information

4. Assume the company uses absorption costing and a LIFO inventory flow assumption (LIFO means last-in first-out. In other words, it assumes that the newest units in inventory are sold first):

a. Compute the unit product cost for Year 1, Year 2, and Year 3. (Round your intermediate calculations and final answers to 2 decimal places.)

b. Prepare an income statement for Year 1, Year 2, and Year 3. (Round your intermediate calculations to 2 decimal places.)

Answer 1

All answers are attached below

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