Required information Skip to question [The following information applies to the questions displayed below.] OBrien Company manufactures
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[The following information applies to the questions displayed below.]
OBrien Company manufactures and sells one product. The following information pertains to each of the companys first three years of operations:
| Variable costs per unit: | |
|---|---|
| Manufacturing: | |
| Direct materials | $ 28 |
| Direct labor | $ 18 |
| Variable manufacturing overhead | $ 5 |
| Variable selling and administrative | $ 4 |
| Fixed costs per year: | |
| Fixed manufacturing overhead | $ 570,000 |
| Fixed selling and administrative expenses | $ 180,000 |
During its first year of operations, OBrien produced 97,000 units and sold 80,000 units. During its second year of operations, it produced 84,000 units and sold 96,000 units. In its third year, OBrien produced 82,000 units and sold 77,000 units. The selling price of the companys product is $75 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 the oldest units in inventory are sold first):
- Compute the unit product cost for Year 1, Year 2, and Year 3.
- Prepare an income statement for Year 1, Year 2, and Year 3.
2. Assume the company uses variable costing and a LIFO inventory flow assumption (LIFO means last-in first-out; in other words, it assumes the newest units in inventory are sold first):
- Compute the unit product cost for Year 1, Year 2, and Year 3.
- Prepare an income statement for Year 1, Year 2, and Year 3.
3. Assume the company uses absorption costing and a FIFO inventory flow assumption (FIFO means first-in first-out; in other words, it assumes the oldest units in inventory are sold first):
- Compute the unit product cost for Year 1, Year 2, and Year 3.
- Prepare an income statement for Year 1, Year 2, and Year 3.
4. Assume the company uses absorption costing and a LIFO inventory flow assumption (LIFO means last-in first-out; in other words, it assumes the newest units in inventory are sold first):
- Compute the unit product cost for Year 1, Year 2, and Year 3.
- Prepare an income statement for Year 1, Year 2, and Year 3.
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