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if the company sells exactly the break-even quantity of each product, what will be the overall profit for the company? 5. Which method should the
if the company sells exactly the break-even quantity of each product, what will be the overall profit for the company? 5. Which method should the company use to calculate each product's break-even point in unit sales? Why? Graw Select cases are available in Connect. CASE 4-29 Variable and Absorption Costing Unit Product Costs and Income Statements LO 4-1, LO 4-2 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 . . . . . . $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 units and sold 80,000 units. Dur- ing its second year of operations, it produced 75,000 units and sold 90,000 units. In its third year, O'Brien produced 80,000 units and sold 75,000 units. The selling price of the company's 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): 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.Chapter 4 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): 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 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): 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. 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): 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. CASE 4-30 Service Organization; Segment Reporting LO 4-4 Music Teachers, Inc., is an educational association for music teachers that has 20,000 mem- bers. The association operates from a central headquarters but has local membership chapters throughout the United States. Monthly meetings are held by the local chapters to discuss recent developments on topics of interest to music teachers. The association's magazine, Teachers' Forum, is issued monthly with features about recent developments in the field. The association publishes books and reports and also sponsors professional courses that qualify for continuing professional education credit. The association's statement of revenues and expenses for the cur- rent year is presented below. Music Teachers, Inc. Statement of Revenues and Expenses For the Year Ended November 30
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