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CASE $629$ Variable and Absorption Costing Unit Product Costs and Income Statements LO$61,$ LO$62$

O$$Brien Company manufactures and sells one product. The following information pertains to each of the company$$s first three years of operations:

Variable costs per unit:

Manufacturing:

Direct materials

$$32$

Direct labor

$$20$

Variable manufacturing overhead

$$4$

Variable selling and administrative

$$3$

Fixed costs per year:

Fixed manufacturing overhead

$$660,000$

Fixed selling and administrative expenses

$$120,000$

During its first year of operations, O$$Brien produced $100,000$ units and sold $80,000$ units. During its second year of operations, it produced $75,000$ units and sold $90,000$ units. In its third year, O$$Brien produced $80,000$ units and sold $75,000$ units. The selling price of the company$$s product is $$75$ per unit.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$)$:

Compute the unit product cost for Year $1,$ Year $2,$ and Year $3.$

Prepare an income statement for Year $1,$ Year $2,$ and Year $3.$

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$)$:

Compute the unit product cost for Year $1,$ Year $2,$ and Year $3.$

Prepare an income statement for Year $1,$ Year $2,$ and Year $3.$