CS_3_WR_4TH_PART_LA: 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 aresold 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 3.4. 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 aresold 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. CASE 4-29 Variable and Absorption Costing Unit Product Costs and Income Statements LO4-1, LO4-2O'Brien Company manufactures and sells one product. The following information pertains to eachof the company's first three years of operations:Variable costs per unit:Manufacturing:Direct materials..$32$20$4$3Direct labor ..Variable manufacturing overhead.Variable selling and administrativeFixed costs per year:Fixed manufacturing overhead.Fixed selling and administrative expenses$660,000$120,000During its first year of operations, O'Brien produced 100,000 units and sold 80,000 units.During its second year of operations, it produced 75,000 units and sold 90,000 units. In its thirdyear, O'Brien produced 80,000 units and sold 75,000 units. The selling price of the company'sproduct is $75 per unit.

Using FIFO method, goods produced first are to be sold first and using LIFO method, goods produced…

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. 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): 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.

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. 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): 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.

Accounting

27th Edition

ISBN:9781337272094

Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Chapter21: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 21.28EX: Appendix Absorption costing income statement On June 30, the end of the first month of operations,...

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Appendix Absorption costing income statement On June 30, the end of the first month of operations, Tudor Manufacturing Co. prepared the following income statement, based on the variable existing concept: Sales (420,000 units) 7,450,000 Variable cost of goods sold: Variable cost of goods manufactured (500,000 units x 14 per unit) 7,000,000 Less ending inventory (80,000 units x 14 per unit) 1,120,000 Variable cost of goods sold 5,880,000 Manufacturing margin 1,570,000 Variable selling and administrative expenses 80,000 Contribution margin 1,490,000 Fixed costs: Fixed manufacturing costs 160,000 Fixed selling and administrative expenses 75,000 235,000 Income from operations 1,255,000 a. Prepare an absorption costing income statement. b. Reconcile the variable costing income from operations of 1,255,000 with the absorption costing income from operations determined in (a).
Appendix Absorption costing income statement On June 30, the end of the first month of operations, Tudor Manufacturing Co. prepared the following income statement, based on the variable existing concept: Sales (420,000 units) 7,450,000 Variable cost of goods sold: Variable cost of goods manufactured (500,000 units x 14 per unit) 7,000,000 Less ending inventory (80,000 units x 14 per unit) 1,120,000 Variable cost of goods sold 5,880,000 Manufacturing margin 1,570,000 Variable selling and administrative expenses 80,000 Contribution margin 1,490,000 Fixed costs: Fixed manufacturing costs 160,000 Fixed selling and administrative expenses 75,000 235,000 Income from operations 1,255,000 a. Prepare an absorption costing income statement. b. Reconcile the variable costing income from operations of 1,255,000 with the absorption costing income from operations determined in (a).
Evaluating selling and administrative cost allocations Gordon Gecco Furniture Company has two major product lines with the following characteristics: Commercial office furniture: Few large orders, little advertising support, shipments in full truckloads, and low handling complexity Home office furniture: Many small orders, large advertising support, shipments in partial truckloads, and high handling complexity The company produced the following profitability report for management: The selling and administrative expenses are allocated to the products on the basis of relative sales dollars. Evaluate the accuracy of this report and recommend an alternative approach.
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