Question

Required Information 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 Direct labor. Variable manufacturine overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selline and administrative $130.eee During its first year of operations. O'Brien produced 93.000 units and sold 75,000 units. During its second year of operations. It produced 78.000 units and sold 91,000 units. In its third year, O'Brien produced 86,000 units and sold 81,000 units. The selling price of the company's product is $80 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. Complete this question by entering your answers in the tabs below. Reg 3A Compute the unit product cost for Year 1, Year 2, and Year 3. (Round your intermediate calculations and final answers to 2 decimal places.) Unit Product Cost Year 1 Year 2 Year 3

Answer 1

Required: 3a Unit product cost Year 1 Direct material 28.00 Direct labor 18.00 Variable manufacturing overhead 5.00 Fixed manufacturing overhead 5.91 Absorption costing unit product cost 56.91 Year 2 28.00 18.00 5.00 7.05 58.05 Year 3 28.00 18.00 5.00 6.40 57.40 Required: 3b O'Brien Company Absorption Costing Income Statement Year 1 Year 2 Sales 6000000 7280000 Cost of goods sold 4268250 5262030 Gross margin 17317502017970 Selling and administrative expenses 355000 403000 Net Operating income 1376750 1614970 Year 3 6480000 46526501 1827350 373000 1454350