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	$	27
Direct labor	$	17
Variable manufacturing overhead	$	4
Variable selling and administrative	$	4
Fixed costs per year:
Fixed manufacturing overhead	$	590,000
Fixed selling and administrative expenses	$	130,000

During its first year of operations, OBrien produced 96,000 units and sold 73,000 units. During its second year of operations, it produced 78,000 units and sold 96,000 units. In its third year, OBrien produced 80,000 units and sold 75,000 units. The selling price of the companys product is $78 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 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):

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.

**BONUS

Answer each question as if you were the managerial accountant for the company. You must not only give the correct numbers but also explain to management what variable costing is, why variable costing is useful and why the net income is different for absorption vs variable costing and also why net income is different for LIFO vs FIFO.