ATTENTION: ALL COMPONENTS / QUESTIONS MUST BE FULLY ANSWERED -- DO NOT USE THE TEXTBOOK SOLUTIONS...

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Accounting

ATTENTION: ALL COMPONENTS / QUESTIONS MUST BE FULLYANSWERED -- DO NOT USE THE TEXTBOOK SOLUTIONS ALREADY INPLACE
IF YOU ARE UNABLE TO ANSWER ALL COMPONENTS, PLEASE DONOT ANSWER. THANK YOU! :)
O’Brien Company manufactures and sells one product. Thefollowing information pertains to each of the company’s first threeyears of operations:
Variable costs per unit:
Manufacturing:
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . $32
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 20
Variable manufacturing overhead . . . . . . . . . . $ 4
Variable selling and administrative . . . . . . . . . $ 3
Fixed costs per year:
Fixed manufacturing overhead . . . . . . . . . . . . $660,000
Fixed selling and administrative expenses . . . $ 120,000
During its first year of operations, O’Brien produced 100,000 unitsand sold 80,000 units. During its second year of operations, itproduced 75,000 units and sold 90,000 units. In its third year,O’Brien produced 80,000 units and sold 75,000 units. The sellingprice of the company’s product is $ 75 per unit.

Required: (ALL COMPONENTS OF ALL 4 QUESTIONS MUST BEANSWERED -- DO NOT USE THE TEXTBOOK SOLUTIONS ALREADY FOUND IN THISBOOK)

1. Assume the company uses variable costing and a FIFOinventory flow assumption (FIFO means first-infirst-out. In other words, it assumes that theoldest units in inventory are sold first):
a. Compute the unit product cost for Year 1, Year 2, and Year3.
b. Prepare an income statement for Year 1, Year 2, and Year3.

2. Assume the company uses variable costing and a LIFOinventory flow assumption (LIFO meanslast-infirst-out. In other words, it assumes that thenewest units in inventory are sold first):
a. Compute the unit product cost for Year 1, Year 2, and Year3.
b. Prepare an income statement for Year 1, Year 2, and Year3.

3. Assume the company uses absorption costing and a FIFOinventory flow assumption (FIFO meansfirst-infirst-out. In other words, it assumes that theoldest units in inventory are sold first):
a. Compute the unit product cost for Year 1, Year 2, andYear 3.
b. Prepare an income statement for Year 1, Year 2, andYear 3.

4. Assume the company uses absorption costing and a LIFOinventory flow assumption (LIFO means last-infirst-out. In other words, it assumes that thenewest units in inventory are sold first):
a. Compute the unit product cost for Year 1, Year 2, and Year3.
b. Prepare an income statement for Year 1, Year 2, and Year3.

Answer & Explanation Solved by verified expert

3.7 Ratings (683 Votes)

Requirement 1 a Unit product cost under variable costing with FIFO is 56 for all the three years b O Brian Company Variable costing Income statement with FIFO Year 1 Year 2 Year 3 Per unit Unit produced 100000 75000 80000 Unit Sales 80000 90000 75000 Sales Revenue 6000000 6750000 5625000 75 Variable cost of goods manufactured Opening inventory 0 1120000 280000 Direct Materials 3200000 2400000 2560000 32 Direct Labor 2000000 1500000 1600000 20 Variable manufacturing overhead 400000 300000 320000 4 Variable cost of goods available for sale 5600000 5320000 4760000 56 Less Closing Inventory 1120000 280000 560000 56 Cost of goods sold 4480000 5040000 4200000 56 Gross Contribution Margin 1520000 1710000 1425000 19 Less Variable selling and administrative 240000 270000 225000 3 Contribution Margin 1280000 1440000 1200000 16 Fixed expenses 90000 Fixed manufacturing overhead See Answer

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ATTENTION: ALL COMPONENTS / QUESTIONS MUST BE FULLYANSWERED -- DO NOT USE THE TEXTBOOK SOLUTIONS ALREADY INPLACEIF YOU ARE UNABLE TO ANSWER ALL COMPONENTS, PLEASE DONOT ANSWER. THANK YOU! :)O’Brien Company manufactures and sells one product. Thefollowing information pertains to each of the company’s first threeyears of operations:Variable costs per unit:Manufacturing:Direct materials . . . . . . . . . . . . . . . . . . . . . . . . $32Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 20Variable manufacturing overhead . . . . . . . . . . $ 4Variable selling and administrative . . . . . . . . . $ 3Fixed costs per year:Fixed manufacturing overhead . . . . . . . . . . . . $660,000Fixed selling and administrative expenses . . . $ 120,000During its first year of operations, O’Brien produced 100,000 unitsand sold 80,000 units. During its second year of operations, itproduced 75,000 units and sold 90,000 units. In its third year,O’Brien produced 80,000 units and sold 75,000 units. The sellingprice of the company’s product is $ 75 per unit.Required: (ALL COMPONENTS OF ALL 4 QUESTIONS MUST BEANSWERED -- DO NOT USE THE TEXTBOOK SOLUTIONS ALREADY FOUND IN THISBOOK)1. Assume the company uses variable costing and a FIFOinventory flow assumption (FIFO means first-infirst-out. In other words, it assumes that theoldest units in inventory are sold first):a. Compute the unit product cost for Year 1, Year 2, and Year3.b. Prepare an income statement for Year 1, Year 2, and Year3.2. Assume the company uses variable costing and a LIFOinventory flow assumption (LIFO meanslast-infirst-out. In other words, it assumes that thenewest units in inventory are sold first):a. Compute the unit product cost for Year 1, Year 2, and Year3.b. Prepare an income statement for Year 1, Year 2, and Year3.3. Assume the company uses absorption costing and a FIFOinventory flow assumption (FIFO meansfirst-infirst-out. In other words, it assumes that theoldest units in inventory are sold first):a. Compute the unit product cost for Year 1, Year 2, andYear 3.b. Prepare an income statement for Year 1, Year 2, andYear 3.4. Assume the company uses absorption costing and a LIFOinventory flow assumption (LIFO means last-infirst-out. In other words, it assumes that thenewest units in inventory are sold first):a. Compute the unit product cost for Year 1, Year 2, and Year3.b. Prepare an income statement for Year 1, Year 2, and Year3.