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a. Compute the unit product cost for Year 1, Year 2, and Year 3. o. Prepare an income statement for Year 1, Year 2, and Year 3.

a. Compute the unit product cost for Year 1, Year 2, and Year 3. o. Prepare an income statement for Year 1, Year 2, and Year 3.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses $27 $ 16 $ 5 $2 $ 510,000 $ 150,000 During its first year of operations, O'Brien produced 93,000 units and sold 80,000 units. During its second year of operations, it produced 81,000 units and sold 89,000 units. In its third year, O'Brien produced 90,000 units and sold 85,000 units. The selling price of the company's product is $77 per unit. 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. 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):
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 Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses $27 $ 16 $ 5 $2 $ 510,000 $ 150,000 During its first year of operations, O'Brien produced 93,000 units and sold 80,000 units. During its second year of operations, it produced 81,000 units and sold 89,000 units. In its third year, O'Brien produced 90,000 units and sold 85,000 units. The selling price of the company's product is $77 per unit. 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. 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):
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. Req 3A Req 3B X Answer is complete but not entirely correct. Prepare an income statement for Year 1, Year 2, and Year 3. Note: Round your intermediate calculations to 2 decimal places. O'Brien Company Absorption Costing Income Statement Year 1 $ 6,160,000 4,974,000 1,186,000 310,000 $ 876,000 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income < Req 3A Year 2 $ 6,853,000 5,010,370 1,842,630 328,000 $ 1,514,630 Year 3 $ 6,545,000 4,731,667 X 1,813,333 320,000 $ 1,493,333 Req 3B
Transcribed Image Text: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. Req 3A Req 3B X Answer is complete but not entirely correct. Prepare an income statement for Year 1, Year 2, and Year 3. Note: Round your intermediate calculations to 2 decimal places. O'Brien Company Absorption Costing Income Statement Year 1 $ 6,160,000 4,974,000 1,186,000 310,000 $ 876,000 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income < Req 3A Year 2 $ 6,853,000 5,010,370 1,842,630 328,000 $ 1,514,630 Year 3 $ 6,545,000 4,731,667 X 1,813,333 320,000 $ 1,493,333 Req 3B
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