Question

I am struggling with the following question: 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 $29 Direct labor $15 Variable manufacturing overhead $3 Variable selling and administrative $3 Fixed costs per year: Fixed manufacturing overhead $580,000 Fixed selling and administrative expenses $100,000 During its first year of operations, O'Brien produced 92,000 units and sold 73,000 units. During its second year of operations, it produced 84,000 units and sold 98,000 units. In its third year, O’Brien produced 83,000 units and sold 78,000 units. The selling price of the company’s product is $76 per unit

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): Prepare an income statement for Year 1, Year 2, and Year 3. 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): Prepare an income statement for Year 1, Year 2, and Year 3 Please help me figure out how to do this question.

Answer 1