O’Brien Company manufactures and sells one product. The following information pe
ID: 2564148 • Letter: O
Question
O’Brien Company manufactures 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 76,000 units. During its second year of operations, it produced 78,000 units and sold 94,000 units. In its third year, O’Brien produced 84,000 units and sold 79,000 units. The selling price of the company’s product is $72 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. (Round your intermediate calculations and final answers to 2 decimal places.)
b. Prepare an income statement for Year 1, Year 2, and Year 3. (Round your intermediate calculations to 2 decimal places.)
Variable costs per unit: Manufacturing: Direct materials $ 30 Direct labor $ 14 Variable manufacturing overhead $ 6 Variable selling and administrative $ 4 Fixed costs per year: Fixed manufacturing overhead $ 540,000 Fixed selling and administrative expenses $ 190,000Explanation / Answer
(a) Absorption Costing Method:
Year 1 Year 2 Year 3
Direct materials $30 $30 $30
Direct labor $14 $14 $14
Variable manufacturing overhead $6 $6 $6
Fixed manufacturing overhead Per unit $5.56 $6.92 $6.42
(Fixed manufacturing overhead / production)
Unit Product cost $55.56 $56.92 $56.42
(b) Income Statement
YEAR 1 YEAR 2 YEAR 3
Total revenue(sales) $5472000 $6768000 $5688000
(Expense)
Direct materials $30 $30 $30
Direct labor $14 $14 $14
Variable manufacturing overhead $6 $6 $6
Variable selling and administrative $4 $4 $4
Fixed manufacturing overhead $540000 $540000 $540000
Fixed selling and administrative expenses $190000 $190000 $190000
Total Expenses ($730054) ($730054) ($730054)
---------------- ---------------- ----------------
Net income $4741946 $6037946 $4957946
IF MY ANSWER IS HELPFUL FOR YOU PLS. LIKE MY ANSWER . (THANK YOU)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.