[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 $ 27 Direct labor $ 16 Variable manufacturing overhead $ 3 Variable selling and administrative $ 3 Fixed costs per year: Fixed manufacturing overhead $ 590,000 Fixed selling and administrative expenses $ 190,000 During its first year of operations, O’Brien produced 96,000 units and sold 73,000 units. During its second year of operations, it produced 84,000 units and sold 102,000 units. In its third year, O’Brien produced 80,000 units and sold 75,000 units. The selling price of the company’s product is $80 per unit. 3. Assume the company uses absorption costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first): 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.
[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 $ 27 Direct labor $ 16 Variable manufacturing overhead $ 3 Variable selling and administrative $ 3 Fixed costs per year: Fixed manufacturing overhead $ 590,000 Fixed selling and administrative expenses $ 190,000 During its first year of operations, O’Brien produced 96,000 units and sold 73,000 units. During its second year of operations, it produced 84,000 units and sold 102,000 units. In its third year, O’Brien produced 80,000 units and sold 75,000 units. The selling price of the company’s product is $80 per unit. 3. Assume the company uses absorption costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first): 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.
[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 $ 27 Direct labor $ 16 Variable manufacturing overhead $ 3 Variable selling and administrative $ 3 Fixed costs per year: Fixed manufacturing overhead $ 590,000 Fixed selling and administrative expenses $ 190,000 During its first year of operations, O’Brien produced 96,000 units and sold 73,000 units. During its second year of operations, it produced 84,000 units and sold 102,000 units. In its third year, O’Brien produced 80,000 units and sold 75,000 units. The selling price of the company’s product is $80 per unit. 3. Assume the company uses absorption costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first): 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.
[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
$
27
Direct labor
$
16
Variable manufacturing overhead
$
3
Variable selling and administrative
$
3
Fixed costs per year:
Fixed manufacturing overhead
$
590,000
Fixed selling and administrative expenses
$
190,000
During its first year of operations, O’Brien produced 96,000 units and sold 73,000 units. During its second year of operations, it produced 84,000 units and sold 102,000 units. In its third year, O’Brien produced 80,000 units and sold 75,000 units. The selling price of the company’s product is $80 per unit.
3. Assume the company uses absorption costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first):
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.
Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.
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