Question
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:
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 | $ | 24 |
Fixed costs per year: | ||
Direct labor | $ | 1,156,000 |
Fixed manufacturing overhead | $ | 830,000 |
Fixed selling and administrative expenses | $ | 254,000 |
|
The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Ogilvy produced 68,000 units and sold 68,000 units. During its second year of operations, it produced 68,000 units and sold 64,600 units. In its third year, Ogilvy produced 68,000 units and sold 71,400 units. The selling price of the companys product is $57 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 $17 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.
Req 1A
ompute the unit product cost for Year 1, Year 2, and Year 3. Assume the company uses super-variable costing.
|
Req 1B
Prepare an income statement for Year 1, Year 2, and Year 3. Assume the company uses super-variable costing.
|
Req 2A
Compute the unit product cost for Year 1, Year 2, and Year 3. Assume the company uses a variable costing system that assigns $17 of direct labor cost to each unit produced.
|
Req 2B
Prepare an income statement for Year 1, Year 2, and Year 3. Assume the company uses a variable costing system that assigns $17 of direct labor cost to each unit produced.
|
Reconcile the difference between the super-variable costing and variable costing net operating incomes in Years 1, 2, and 3.
Req 3
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started