Required information [The following information applies to the questions display
ID: 2402106 • Letter: R
Question
Required information
[The following information applies to the questions displayed below.]
Inner Secret T Shirt Company produces and sells one product. The following information pertains to each of the company’s first three years of operations:
During its first year of operations, O’Brien produced 97,000 units and sold 73,000 units. During its second year of operations, it produced 79,000 units and sold 98,000 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 $73 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.
Variable costs per unit: Manufacturing: Direct materials $ 27 Direct labor $ 15 Variable manufacturing overhead $ 5 Variable selling and administrative $ 3 Fixed costs per year: Fixed manufacturing overhead $ 600,000 Fixed selling and administrative expenses $ 170,000Explanation / Answer
Workings:
The Calculations are shown separately in the Workings.
Workings:
You can also include Cost of goods Sold workings in The Income Statement.
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Year 1 Year 2 Year 3 Material $ 27.00 $ 27.00 $ 27.00 Labour $ 15.00 $ 15.00 $ 15.00 Variable Overhead $ 5.00 $ 5.00 $ 5.00 Fixed Over Head* $ 6.19 $ 7.59 $ 6.74 Unit product cost $ 53.19 $ 54.59 $ 53.74Related Questions
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