Question

LUIELLUN Required Information Case 6 29 Variable and Absorption Costing Unt Product Costs and Income Statements (LO6-1, L062 me blowing information applies to the questions displayed below. O'Brien Company manufactures and sets 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 $590, Bee Fixed selling and administrative expenses $160, eee During its first year of operations. O'Brien produced 93.000 units and sold 79.000 units. During its second year of operations. It produced 76,000 units and sold 5,000 units. In its third year, O'Brien produced 80,000 units and sold 75,000 unts. The selling price of the company's product is $70 per unit. Case 6-29 Part-1 Required: 1. Assume the company uses variable costing and FIFO Inventory flow assumption (FIFO means first in first-out. In other words. assumes that the oldest units in inventory are sold Trst a. Compute the unit product cost for Year 4 Year 2. and Year 3. bi Prepare an income statement for Year 1 Year 2 and Year 3. Complete this question by entering your answers in the tabs below. Comment 1 Year 2 nd Year 3 Unit Provot CoBit

Answer 1

Hi

Let me know in case you face any issue:

Solution: 1)a Answers are highlighted in yellow, refer horizontal format for vertical format in question: Format and naming of income statement is not available, can be slightly different: Both parts have been answered:) Particulars Year 1 Year 2 Year 3 Direct Material 29 $ 29 $ Direct Labor - 14 $ 14 $ 14 Variable Manufacturing overhead 5 $ 5 $ Unit Product cost under variable costing $ 48 $ 48 $ 48 79000 85000 75000 1)b Year 1 5530000 Year 2 5950000 Year 3 5250000 Income Statement Particulars Sales Revenue @ 70 Less: Variable Expenses: Direct Material @ 29 Direct Labor @ 14 Variable Manufacturing overhead @ 5 Variable Selling and admin. @ 3 Total Variable Expenses Contribution Margin (Sale - Variable expense) Less: Fixed Expenses: Fixed Manufacturing overhead Fixed Selling and Admin. Expenses 2291000 1106000 395000 237000 4029000 1501000 2465000 1190000 425000 255000 4335000 1615000 1575000 1050000 375000 225000 3225000 2025000 590000 160000 590000 160000 590000 160000 Total Fixed Expenses Net Operating income /-loss 750000 751000 750000 865000 750000 1275000