Question
OBrien Company manufactures and sells one product. The following information pertains to each of the companys first three years of operations: Information During its first
OBrien Company manufactures and sells one product. The following information pertains to each of the companys first three years of operations: Information During its first year of operations, OBrien produced 100,000 units and sold 80,000 units. During its second year of operations, it produced 75,000 units and sold 90,000 units. In its third year, OBrien produced 80,000 units and sold 75,000 units. The selling price of the companys product is $75 per unit.
Additional information
VARIABLE COST PER UNIT
Direct materials $ 32
Direct labor $20
Variable manufacturing overhead $4
Variable selling and administrative expense $3
FIXED COST PER YEAR
Fixed manufacturing overhead $660 000
Fixed selling and administrative expense $120000
Required:
- 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.
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.
(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 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.
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):
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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