Question

Case 4-29 (Algo) Variable and Absorption Costing Unit Product Costs and Income Statements (L04-1, LO4-2) 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 manufacturing overhead Variable selling and administrative Fixed costs per year! Pixed manufacturing overhead Pixed selling and administrative expenses $570,000 $200,000 During its first year of operations, O'Brien produced 90,000 units and sold 71,000 units. During its second year of operations, it produced 81,000 units and sold 95,000 units. In its third year, O'Brien produced 83,000 units and sold 78,000 units. The selling price of the company's product is $74 per unit. Case 4-29 (Algo) Part-1

Answer 1

Particulars			Year 1	Year 2	Year 3
Direct Materials			$   27.00	$   27.00	$   27.00
Direct Labor			$   18.00	$   18.00	$   18.00
Variable Manu. OH			$      3.00	$      3.00	$      3.00
Unit product cost			$   48.00	$   48.00	$   48.00

Income Statement
Particulars				Year 1	Year 2	Year 3
Sales				$ 5,254,000.00	$ 7,030,000.00	$ 5,772,000.00
Variable Expenses:
Variable Cost of Goods sold				$ 3,408,000.00	$ 4,560,000.00	$ 3,744,000.00
Variable selling and adm. Expenses				$    142,000.00	$    190,000.00	$    156,000.00
Total Variable Expenses				$ 3,550,000.00	$ 4,750,000.00	$ 3,900,000.00
Contribution Margin				$ 1,704,000.00	$ 2,280,000.00	$ 1,872,000.00
Fixed Expenses:
Fixed Manu. OH				$    570,000.00	$    570,000.00	$    570,000.00
Fixed selling and adm. Expenses				$    200,000.00	$    200,000.00	$    200,000.00
Total Fixed Expenses				$    770,000.00	$    770,000.00	$    770,000.00
Net Operating Income				$    934,000.00	$ 1,510,000.00	$ 1,102,000.00