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	$29
Direct labor	$16
Variable manufacturing overhead	$6
Variable selling and administrative	$2
Fixed costs per year:
Fixed manufacturing overhead	$580,000
Fixed selling and administrative expenses	$180,000

During its first year of operations, OBrien produced 98,000 units and sold 76,000 units. During its second year of operations, it produced 76,000 units and sold 93,000 units. In its third year, OBrien produced 86,000 units and sold 81,000 units. The selling price of the companys product is $78 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):

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
Fixed expenses:
Total fixed expenses