Please show computations for all questions. Question 3 O\'Brien Company manufact

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Please show computations for all questions.

Question 3 O'Brien Company manufactures and sells one prodact. 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 532 $20 S4 53 Fixed costs per year Fixed manufacturing overhead Fixed selling and administrative expenses $660,000 $120,000 During its first year of operations, O'Brien produced 100,000 units and sold 80,000 units. During its second year of operations, it produced 75,000 units and sold 90,000 units. In its third year, O'Brien produced 80,000 units and sold 75,000 units. The selling price of the company's product is $75 per unit Required: I. 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. 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 I, Year 2, and Year 3. B. Prepare an income statement for Year I, Year 2 and Year 3 2.

Explanation / Answer

Variable costing : I year II year III year Total Per unit Per unit Per unit Qty Rate Amount Amount Amount Amount Sales            80,000 75 6000000 75 90000 75 6750000 75000 75 5625000 Less : Variable cost of goods sold : Opening stock 0 20000 5000 Add : produced during the year 100000 75000 80000 Less: closing stock 20000 5000 5000 80000 56 4480000 56 90000 56 5040000 75000 56 4200000 Gross profit 1520000 1710000 1425000 Less : Variable marketing cost 80000 3 240000 3 90000 3 270000 75000 3 225000 Contribution 1280000 1440000 1200000 Less : Total fixed cost 780000           9.75 8.666667 780000 10.4 780000 Net Income 500000           6.25 7.333333 660000 5.6 420000 Per unit cost         68.75 67.66667 69.4 Variable cost of goods sold: Direct material 32 Direct labour 20 Variable manufacturing 4 Total: 56 Absorption costing I year II year III year Total Per unit Per unit Per unit Qty Rate Amount Amount Amount Amount Sales      80,000 75 6000000 75 90000 75 6750000 75000 75 5625000 Less : cost of goods sold : Opening stock 0 20000 5000 Add : produced during the year 100000 75000 80000 Less: closing stock 20000 5000 5000 80000 5140000         64.25 90000 63.33333 5700000 75000 64.8 4860000 Gross profit 860000 1050000 765000 Less : Variable marketing cost 80000 3 240000 3 90000 3 270000 75000 3 225000 Contribution 620000 780000 540000 Less : fixed cost 120000 1.333333 120000 120000 Net Income 500000 7.333333 660000 420000 Per unit cost         67.25 67.66667 67.8 cost of goods sold: Direct material 32 32 32 32 32 Direct labour 20 20 20 20 20 Variable manufacturing 4 4 4 4 4 Manufacturing Fixed overheads 660000/ No of units sold 660000           8.25 660000/ No of units sold 7.333333 8.8 totl         64.25 63.33333 64.8

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