Question

Variable Costing Case osting Case O'Brilen Company manufectures and selis one product. The following Information pertains to each of the first three years of operations oosts per unit Ranufaeturinga Direct materials Variable manafacturing overhead Varisble selling and administrative Pixed coats per ixed afae ing overhead 660.00 During its first year of operations, 'Brien produced 100.000 units and sold 80.000 units. During s second year of operations, it produced 75,000 units and sold 90,000 units. In its third year, OBnen produced 80,000 units and sold 75,000 units. The selling price of the company's product is $75 per unit 3. Assume the company uses absorption costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, R assumes that the oidest units in inventory are soid first a. Compute the unit product cost for Year 1 Year 2, and Year 3 b. Prepare an income statement for Year1, Year 2, and Year 3 Complete this question by entering your answers in the tabs below Req 34Req 38 Prepare an income statement for Year 1, Year 2, and Year 3. (Round your intermediate calculations to 2 decimal places.) Absorption Coating Income Statement

Answer 1

Construct The Absorption Costing Unit Product Cost
				Year 1	Year 2	Year 3
Direct Material				32	32	32
Direct labour				20	20	20
Variable Manufacturing overheads				4	4	4
Fixed Manufacturing overheads				6.60	8.80	8.25
Absorption costing unit prroduct cost				62.60	64.80	64.25
Construct the Absorption Costing Income Statement Under FIFO
				Year 1	Year 2	Year 3
Sales				$6,000,000	$6,750,000	5625000
Cost of Goods sold				5008000	5788000	4821500
Gross Margin				$992,000	$962,000	$803,500
Selling and distribution expense				360,000	390,000	345000
Net operating income				632,000	572,000	$458,500
Cost of goods sold for Year-2 = 20000*62.60+ 70000*64.80 = 5788000
Cost of goods ssold for Year-3 = 5000*64.80+70000*64.25 = 4821500