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	$26
Direct labor	$16
Variable manufacturing overhead	$3
Variable selling and administrative	$1
Fixed costs per year:
Fixed manufacturing overhead	$510,000
Fixed selling and administrative expenses	$120,000

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.

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

	Unit Product Cost
Year 1
Year 2
Year 3

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

OBrien 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

c. 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):

d 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

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

OBrien Company
Absorption Costing Income Statement
	Year 1	Year 2	Year 3
	0	0	0
	$0	$0	$0