FINANCIAL ACCOUNTING
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CS_3_LA_QA3
3A: Compute the unit product cost for Year 1, Year 2, and Year 3. (Round your intermediate calculations and final answers to 2 decimal places.)
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3B: Prepare an income statement for Year 1, Year 2, and Year 3. (Round your intermediate calculations to 2 decimal places.)
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![Required information
[The following information applies to the questions displayed below.]
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
28
Direct labor
15
Variable manufacturing overhead
Variable selling and administrative
Fixed costs per year:
Fixed manufacturing overhead
Fixed selling and administrative expenses
4
4
$530,000
$100,000
During its first year of operations, O'Brien produced 93,000 units and sold 77,000 units. During its second year of
operations, it produced 83,000 units and sold 94,000 units. In its third year, O'Brien produced 89,000 units and sold
84,000 units. The selling price of the company's 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.
Complete this question by entering your answers in the tabs below.](https://content.bartleby.com/qna-images/question/b48b944a-de75-4d58-aa97-6215805e26f6/353a2557-368b-4f8f-9c6d-12f17da50ee6/0aw6d1s_processed.jpeg)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
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
28
Direct labor
15
Variable manufacturing overhead
Variable selling and administrative
Fixed costs per year:
Fixed manufacturing overhead
Fixed selling and administrative expenses
4
4
$530,000
$100,000
During its first year of operations, O'Brien produced 93,000 units and sold 77,000 units. During its second year of
operations, it produced 83,000 units and sold 94,000 units. In its third year, O'Brien produced 89,000 units and sold
84,000 units. The selling price of the company's 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.
Complete this question by entering your answers in the tabs below.
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