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: Fixed manufacturing overhead Fixed selling and administrative expenses $ 26 $ 14 $6 $3 $ 550,000 $ 190,000 During its first year of operations, O'Brien produced 97,000 units and sold 73,000 units. During its second year of operations, it produced 76,000 units and sold 95,000 units. In its third year, O'Brien produced 88,000 units and sold 83,000 units. The selling price of the company's product is $74 per unit.

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Chapter1: Financial Statements And Business Decisions
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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:
Fixed manufacturing overhead
Fixed selling and administrative expenses
Case 6-29 Part-1 (Algo)
$26
$14
$6
$ 3
During its first year of operations, O'Brien produced 97,000 units and sold 73,000 units. During its second year of
operations, it produced 76,000 units and sold 95,000 units. In its third year, O'Brien produced 88,000 units and sold
83,000 units. The selling price of the company's product is $74 per unit.
$ 550,000
$ 190,000
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.
Required:
1. Assume the company uses variable costing and a FIFO inventory flow assumption (FIFO means first-in first-out; in other words, it
assumes the oldest units in inventory are sold first):
Transcribed Image Text: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: Fixed manufacturing overhead Fixed selling and administrative expenses Case 6-29 Part-1 (Algo) $26 $14 $6 $ 3 During its first year of operations, O'Brien produced 97,000 units and sold 73,000 units. During its second year of operations, it produced 76,000 units and sold 95,000 units. In its third year, O'Brien produced 88,000 units and sold 83,000 units. The selling price of the company's product is $74 per unit. $ 550,000 $ 190,000 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. Required: 1. Assume the company uses variable costing and a FIFO inventory flow assumption (FIFO means first-in first-out; in other words, it assumes the oldest units in inventory are sold first):
Req 1A
Prepare an income statement for Year 1, Year 2, and Year 3.
O'Brien Company
Variable Costing Income Statement
Sales
Variable expenses:
Req 1B
Total variable expenses
Fixed expenses:
Total fixed expenses
Year 1
$ 5,402,000
0
5,402,000
Year 2
$7,030,000
0
7,030,000
0
$
Year 3
6,142,000
0
6,142,000
$ 5,402,000 $ 7,030,000 $ 6,142,000
Transcribed Image Text:Req 1A Prepare an income statement for Year 1, Year 2, and Year 3. O'Brien Company Variable Costing Income Statement Sales Variable expenses: Req 1B Total variable expenses Fixed expenses: Total fixed expenses Year 1 $ 5,402,000 0 5,402,000 Year 2 $7,030,000 0 7,030,000 0 $ Year 3 6,142,000 0 6,142,000 $ 5,402,000 $ 7,030,000 $ 6,142,000
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