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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	$	16
Variable manufacturing overhead	$	6
Variable selling and administrative	$	2
Fixed costs per year:
Fixed manufacturing overhead	$	510,000
Fixed selling and administrative expenses	$	200,000

During its first year of operations, O’Brien produced 91,000 units and sold 77,000 units. During its second year of operations, it produced 77,000 units and sold 86,000 units. In its third year, O’Brien produced 86,000 units and sold 81,000 units. The selling price of the company’s product is $79 per unit.

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.

Complete this question by entering your answers in the tabs below.

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

	Unit Product Cost Year 1 Year 2 Year 3

Complete this question by entering your answers in the tabs below.

• Req 2A
• Req 2B

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

	O’Brien Company Variable Costing Income Statement Year 1 Year 2 Year 3 Variable expenses: Total variable expenses 0 0 0 0 0 0 Fixed expenses: Total fixed expenses 0 0 0 $0 $0 $0

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.

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

Complete this question by entering your answers in the tabs below.

• Req 3A
• Req 3B

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

	Unit Product Cost Year 1 Year 2 Year 3

• Req 3A
• Req 3B

• Complete this question by entering your answers in the tabs below.

• Req 3A
• Req 3B

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

  	O’Brien Company Absorption Costing Income Statement Year 1 Year 2 Year 3 0 0 0 $0 $ 0 $0

  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.

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

• Complete this question by entering your answers in the tabs below.

• Req 4A
• Req 4B

• 	Unit Product Cost Year 1 Year 2 Year 3

• Req 4A
• Req 4B

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

  Complete this question by entering your answers in the tabs below.

• Req 4A
• Req 4B

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

  	O’Brien Company Absorption Costing Income Statement    Year 1 Year 2 Year 3

• Req 4A
• Req 4B

Answer 1