O'Brien Company manufactures and sells one product. The following information pertains to each o the company's first three years of operations: Variable costs per unit: Manufacturing: Direct materials S 26 Direct labor S 15 Variable manufacturing overhead S 5 Variable selling and administrative $ 2 Fixed costs per year: Fixed manufacturing overhead S 550,000 Fixed selling and administrative expenses S 130,000 During its first year of operations, O'Brien produced 90,000 units and sold 72,000 units. During its second year of operations, it produced 75,000 units and sold 88,000 units. In its third year, O'Brien produced 85,000 units and sold 80,000 units. The selling price of the company's product is S74 per unit.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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[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
$ 26
Direct labor
$ 15
Variable manufacturing overhead
Variable selling and administrative
$ 2
Fixed costs per year:
Fixed manufacturing overhead
S 550,000
Fixed selling and administrative expenses
$ 130,000
During its first year of operations, O'Brien produced 90,000 units and sold 72,000 units. During its
second year of operations, it produced 75,000 units and sold 88,000 units. In its third year, O'Brien
produced 85,000 units and sold 80,000 units. The selling price of the company's product is $74 per
unit.
Required:
1. Assume the company uses variable 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.
Transcribed Image Text:Required information Skip to question [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 $ 26 Direct labor $ 15 Variable manufacturing overhead Variable selling and administrative $ 2 Fixed costs per year: Fixed manufacturing overhead S 550,000 Fixed selling and administrative expenses $ 130,000 During its first year of operations, O'Brien produced 90,000 units and sold 72,000 units. During its second year of operations, it produced 75,000 units and sold 88,000 units. In its third year, O'Brien produced 85,000 units and sold 80,000 units. The selling price of the company's product is $74 per unit. Required: 1. Assume the company uses variable 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.
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