operations: Variable costs per unit: Manufacturing: Direct materials Direct labor $26 $16 $3 $3 Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead $ 510,000 Fixed selling and administrative expenses $ 170,000 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 82,000 units and sold 77,000 units. The selling price of the company's product is $73 per unit. 4. 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): 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. Compute the unit product cost for Year 1, Year 2, and Year 3. (Round your intermediate calculations and final answers to 2 decimal places.)
operations: Variable costs per unit: Manufacturing: Direct materials Direct labor $26 $16 $3 $3 Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead $ 510,000 Fixed selling and administrative expenses $ 170,000 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 82,000 units and sold 77,000 units. The selling price of the company's product is $73 per unit. 4. 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): 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. Compute the unit product cost for Year 1, Year 2, and Year 3. (Round your intermediate calculations and final answers to 2 decimal places.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
$ 510,000
Fixed selling and administrative expenses $ 170,000
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 82,000 units and sold 77,000 units. The selling price of
the company's product is $73 per unit.
4. 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):
$26
$16
$3
$3
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.
Compute the unit product cost for Year 1, Year 2, and Year 3. (Round your intermediate calculations and final answers to 2 decimal
places.)
Year 1
Year 2
Year 3
Unit Product Cost
Prepare an income statement for Year 1, Year 2, and Year 3. (Round your intermediate calculations to 2 decimal places.)
O'Brien Company
Absorption Costing Income Statement
Year 1 Year 2 Year 3
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