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

During its first year of operations, O’Brien produced 98,000 units and sold 76,000 units. During its second year of operations, it produced 76,000 units and sold 93,000 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 $78 per unit.

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.

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

During its first year of operations, O’Brien produced 98,000 units and sold 76,000 units. During its second year of operations, it produced 76,000 units and sold 93,000 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 $78 per unit.

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.)

Haas 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 $20   
      Direct labor $12   
      Variable manufacturing overhead $3   
    Variable selling and administrative $1   
  Fixed costs per year:
    Fixed manufacturing overhead $ 390,000   
    Fixed selling and administrative expenses $ 210,000   

During its first year of operations, Haas produced 50,000 units and sold 50,000 units. During its second year of operations, it produced 65,000 units and sold 40,000 units. In its third year, Haas produced 30,000 units and sold 55,000 units. The selling price of the company’s product is $48 per unit.

  
Required:

1. Compute the company’s break-even point in units sold.

2. Assume the company uses variable costing:

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.

3. Assume the company uses absorption costing:

a.

Compute the unit product cost for year 1, year 2, and year 3. (Round your intermediate 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.)

Interest during Construction

Dexter Construction Corporation is building a student condominium complex; it started construction on January 1, Year 1. Dexter borrowed $1 million specifically for the project by issuing a 10%, 5-year, $1 million note, which is payable on December 31 of Year 3. Dexter also had a 12%, 5-year, $3 million note payable and a 10%, 10-year, $1.8 million note payable outstanding all year.

In Year 1, Dexter incurred costs as follows:

Calculate Dexter's capitalized interest on the student condominium complex for Year 1.

Required:

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

During its first year of operations, O’Brien produced 100,000 units and sold 79,000 units. During its second year of operations, it produced 79,000 units and sold 95,000 units. In its third year, O’Brien produced 83,000 units and sold 78,000 units. The selling price of the company’s product is $77 per unit.

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.

Haas 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 $ 25 Direct labor $ 12 Variable manufacturing overhead $ 4 Variable selling and administrative $ 2 Fixed costs per year: Fixed manufacturing overhead $ 480,000 Fixed selling and administrative expenses $ 360,000 During its first year of operations, Haas produced 60,000 units and sold 60,000 units. During its second year of operations, it produced 75,000 units and sold 50,000 units. In its third year, Haas produced 40,000 units and sold 65,000 units. The selling price of the company’s product is $57 per unit. Required:

1. Compute the company’s break-even point in units sold.

2. Assume the company uses variable costing: 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.

3. Assume the company uses absorption costing: a. Compute the unit product cost for year 1, year 2, and year 3. (Round your intermediate 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.)

Calculate the depreciation for the following scenarios.  Bought a piece of equipment costing $30,000, with a salvage value of $10,000.

a) Figure the SL depreciation for year one and year two.  Assuming a 10 year useful life.

b) Figure the units of production (activity) depreciation.  Assuming that total units will be 100,000.

                    Year 1 – 20,000 units

                    Year 2 -  30,000 units

c)Figure the double declining balance depreciation for year one and year two.  Assuming a 4 year life.

d) Figure the SL depreciation; assuming a 10 year life; if the equipment was purchased on July 1^st.

e) Prepare the Journal Entry for a (SL Depreciation)

Calculate the depreciation for the following scenarios.  Bought a piece of equipment costing $30,000, with a salvage value of $10,000.

a) Figure the SL depreciation for year one and year two.  Assuming a 10 year useful life.

b) Figure the units of production (activity) depreciation.  Assuming that total units will be 100,000.

                    Year 1 – 20,000 units

                    Year 2 -  30,000 units

c)Figure the double declining balance depreciation for year one and year two.  Assuming a 4 year life.

d) Figure the SL depreciation; assuming a 10 year life; if the equipment was purchased on July 1^st.

e) Prepare the Journal Entry for a (SL Depreciation)

Jessica is a one-third owner in Bikes-R-Us, an S corporation that experienced a $51,900 loss this year (year 1). Assume her stock basis is $12,760 at the beginning of the year and that at the beginning of year 1 Jessica loaned Bikes-R-Us $3,690. In year 2, Bikes-R-Us reported ordinary income of $13,380. (Leave no answer blank. Enter zero if applicable.)

Required:

1. What amount is Jessica allowed to deduct in year 1 and year 2?
2. What are her stock and debt bases in the corporation at the end of year 1?
3. What are her stock and debt bases in the corporation at the end of year 2?

ROI

EPS

EBITDA

NOPAT

Consistent improvement in EPS year after year is the indication of continuous improvement in the company’s earning power.

Consistent improvement in EPS year after year is the indication of continuous decline in the company’s earning power.

Consistent improvement in EPS year after year is the indication of fraud within the company.

Consistent improvement in EPS year after year is the indication that the company will never suffer a year of net loss rather than net income.