Ogilvy Company manufactures and sells one product. The following information pertains to each of the companys first three years of operations:

Variable cost per unit:
Direct materials	$	35
Fixed costs per year:
Direct labor	$	2,212,000
Fixed manufacturing overhead	$	841,000
Fixed selling and administrative expenses	$	320,000

The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Ogilvy produced 79,000 units and sold 79,000 units. During its second year of operations, it produced 79,000 units and sold 73,400 units. In its third year, Ogilvy produced 79,000 units and sold 84,600 units. The selling price of the companys product is $78 per unit.

Required:

1. Assume the company uses super-variable costing:

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 a variable costing system that assigns $28 of direct labor cost to each unit produced:

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. Reconcile the difference between the super-variable costing and variable costing net operating incomes in Years 1, 2, and 3.

1b

Prepare an income statement for Year 1, Year 2, and Year 3. Assume the company uses super-variable costing.

Ogilvy Company
Super-Variable Costing Income Statement
	Year 1	Year 2	Year 3
	0	0	0
Fixed expenses:
Total fixed expenses	0	0	0
Net operating income(loss)	$0	$0	$0

2a

Compute the unit product cost for Year 1, Year 2, and Year 3. Assume the company uses a variable costing system that assigns $28 of direct labor cost to each unit produced.

	Unit Product Cost
Year 1
Year 2
Year 3

2b

Prepare an income statement for Year 1, Year 2, and Year 3. Assume the company uses a variable costing system that assigns $28 of direct labor cost to each unit produced.

Ogilvy Company
Variable Costing Income Statement
	Year 1	Year 2	Year 3
	0	0	0
Fixed expenses:
Total fixed expenses	0	0	0
Net operating income (loss)	$0	$0	$0

req 3

Reconcile the difference between the super-variable costing and variable costing net operating incomes in Years 1, 2, and 3.

	Year 1	Year 2	Year 3
Super-variable costing net operating income (loss)
Variable costing net operating income (loss)	$0	$0	$0