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 $ 26 Direct labor $ 15 Variable manufacturing overhead $ 5 Variable selling and administrative $ 2 Fixed costs per year: Fixed manufacturing overhead $ 570,000 Fixed selling and administrative expenses $ 140,000 During its first year of operations, O’Brien produced 96,000 units and sold 77,000 units. During its second year of operations, it produced 85,000 units and sold 99,000 units. In its third year, O’Brien produced 87,000 units and sold 82,000 units. The selling price of the company’s product is $79 per unit. 4. Assume the company uses absorption costing and a LIFO inventory flow assumption (LIFO means last-in first-out. In other words, it assumes that the newest units in inventory are sold first): Compute the unit product cost for Year 1, Year 2, and Year 3. Prepare an income statement for Year 1, Year 2, and Year 3 Req 4A Req 4B Prepare an income statement for Year 1, Year 2, and Year 3. Note: Round your intermediate calculations to 2 decimal places.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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 | $ 26 |
| Direct labor | $ 15 |
| Variable manufacturing |
$ 5 |
| Variable selling and administrative | $ 2 |
| Fixed costs per year: | |
| Fixed manufacturing overhead | $ 570,000 |
| Fixed selling and administrative expenses | $ 140,000 |
During its first year of operations, O’Brien produced 96,000 units and sold 77,000 units. During its second year of operations, it produced 85,000 units and sold 99,000 units. In its third year, O’Brien produced 87,000 units and sold 82,000 units. The selling price of the company’s product is $79 per unit.
4. Assume the company uses absorption costing and a LIFO inventory flow assumption (LIFO means last-in first-out. In other words, it assumes that the newest units in inventory are sold first):
- Compute the unit product cost for Year 1, Year 2, and Year 3.
- Prepare an income statement for Year 1, Year 2, and Year 3
- Req 4A
- Req 4B
Prepare an income statement for Year 1, Year 2, and Year 3.
Note: Round your intermediate calculations to 2 decimal places.
|
I am trying to determine the Last In first out (LIFO). I know the two answers that are incorrect have to be broken down, but I am not certain if they should be 80% /20% for Year 2 and Year 3 96% / 4%
Year 2 - 99,000 units
Year 3 - 82,000 units
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How do you determine the percentage breakdown for year 2? How is it determined that 86% (85,000 units) and 14% (14,000) will be used out of the 99,000 units?
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