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 $ 570,000 $ 110,000 During its first year of operations, O'Brien produced 100,000 units and sold 74,000 units. During its second year of operations, it produced 76,000 units and sold 97,000 units. In its third year, O'Brien produced 81,000 units and sold 76,000 units. The selling price of the company's product is $77 per unit. Fixed selling and administrative expenses $ 27 $ 14 $4 $2 e 4-29 Part-1 (Algo) uired: sume the company uses variable costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In r words, it assumes that the oldest units in inventory are sold first): Ompute the unit product cost for Year 1, Year 2, and Year 3. epare an income statement for Year 1, Year 2, and Year 3.
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 $ 570,000 $ 110,000 During its first year of operations, O'Brien produced 100,000 units and sold 74,000 units. During its second year of operations, it produced 76,000 units and sold 97,000 units. In its third year, O'Brien produced 81,000 units and sold 76,000 units. The selling price of the company's product is $77 per unit. Fixed selling and administrative expenses $ 27 $ 14 $4 $2 e 4-29 Part-1 (Algo) uired: sume the company uses variable costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In r words, it assumes that the oldest units in inventory are sold first): Ompute the unit product cost for Year 1, Year 2, and Year 3. epare an income statement for Year 1, Year 2, and Year 3.
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The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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![Required information
Case 4-29 (Algo) Variable and Absorption Costing Unit Product Costs and Income Statements [LO4-1,
LO4-2]
[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
Direct labor
Variable manufacturing overhead
Variable selling and
administrative
Fixed costs per year:
Fixed manufacturing overhead
Fixed selling and administrative
expenses
$
570,000
$
110,000
During its first year of operations, O'Brien produced 100,000 units and sold 74,000 units. During its second
year of operations, it produced 76,000 units and sold 97,000 units. In its third year, O'Brien produced 81,000
units and sold 76,000 units. The selling price of the company's product is $77 per unit.
Case 4-29 Part-1 (Algo)
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 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.
Complete this question by entering your answers in the tabs below.
$ 27
$14
$4
$2
Req 1A Req 1B
Prepare an income statement for Year 1, Year 2, and Year 3.
O'Brien Company
Variable Costing Income Statement
Year 1 Year 2
Sales
Variable expenses:
Variable cost of goods sold
Variable selling and
administrative
Total variable expenses
Contribution margin
Fixed expenses:
Fixed manufacturing overhead
0
0
0
0
Year 3
0
0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4bcf247f-09ed-4930-be62-b4d24c9bf828%2Fdde0439d-3e95-4e87-9ec7-355dc03f5636%2Fi3l8816_processed.png&w=3840&q=75)
Transcribed Image Text:Required information
Case 4-29 (Algo) Variable and Absorption Costing Unit Product Costs and Income Statements [LO4-1,
LO4-2]
[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
Direct labor
Variable manufacturing overhead
Variable selling and
administrative
Fixed costs per year:
Fixed manufacturing overhead
Fixed selling and administrative
expenses
$
570,000
$
110,000
During its first year of operations, O'Brien produced 100,000 units and sold 74,000 units. During its second
year of operations, it produced 76,000 units and sold 97,000 units. In its third year, O'Brien produced 81,000
units and sold 76,000 units. The selling price of the company's product is $77 per unit.
Case 4-29 Part-1 (Algo)
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 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.
Complete this question by entering your answers in the tabs below.
$ 27
$14
$4
$2
Req 1A Req 1B
Prepare an income statement for Year 1, Year 2, and Year 3.
O'Brien Company
Variable Costing Income Statement
Year 1 Year 2
Sales
Variable expenses:
Variable cost of goods sold
Variable selling and
administrative
Total variable expenses
Contribution margin
Fixed expenses:
Fixed manufacturing overhead
0
0
0
0
Year 3
0
0
Expert Solution
Step 1 Introduction
The income statement records the revenue and expenses of the period and tells about the profitability of the period. The variable costing assumes that the fixed costs are to be expensed during the period they are incurred.
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