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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	$	26
Direct labor	$	15
Variable manufacturing overhead	$	4
Variable selling and administrative	$	3
Fixed costs per year:
Fixed manufacturing overhead	$	500,000
Fixed selling and administrative expenses	$	190,000

During its first year of operations, OBrien produced 99,000 units and sold 77,000 units. During its second year of operations, it produced 78,000 units and sold 95,000 units. In its third year, OBrien produced 90,000 units and sold 85,000 units. The selling price of the companys product is $79 per unit.

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.

Answer is not complete.

Complete this question by entering your answers in the tabs below.

• Req 3A
• Req 3B

Prepare an income statement for Year 1, Year 2, and Year 3. (Round your intermediate calculations to 2 decimal places.)

OBrien Company
Absorption Costing Income Statement
	Year 1	Year 2	Year 3
Salesselected answer correct	$6,083,000selected answer correct	$7,505,000selected answer correct	$6,715,000selected answer correct
Cost of goods sold selected answer correct	3,853,850selected answer correct	3,980,060selected answer incorrect	not attempted
Gross margin selected answer correct	2,229,150	3,524,940	6,715,000
Selling and administrative expenses selected answer correct	not attempted	not attempted	not attempted
Net operating income selected answer correct	$2,229,150	$3,524,940	$6,715,000