case 5 The following information applies to the questions di

case 5

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: Varlable costs per unit: Manufacturing: Direct materials Direct labor Varlable manufacturing overhead Varlable selling and administrative $27 S16 $5 S4 Fixed costs per year. Flxed manufacturing overhead Fixed sellilng and administrative expenses $570,000 $130,000 During its first year of operations, O\'Brien produced 92,000 units and sold 72,000 units. During its second year of operations, it produced 85,000 units and sold 100,000 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 $71 per unit.

Solution

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. Year 1 Year 2 Year 3 Beginning Inventory 20000 5000 Production 92000 85000 88000 Sale 72000 100000 83000 Ending Inventory 20000 5000 10000 1a. Year 1 Year 2 Year 3 Variable Cost: Direct Material 26 26 26 Direct Labor 16 16 16 Variable Manu Ovh 5 5 5 Unit Product Cost 47 47 47 1b. Year 1 Year 2 Year 3 Sale A-B 5112000 7100000 5893000 Variable Expense: Direct Material 1872000 2600000 2158000 Direct Labor 1152000 1600000 1328000 Variable Manu Ovh 360000 500000 415000 Variable SnD Exp 288000 400000 332000 Total Variable Expense B 3672000 5100000 4233000 Contribution Margin A-B=C 1440000 2000000 1660000 Fixed Expense: Fixed Manufactured Expense 570000 570000 570000 Fixed SnD Expense 130000 130000 130000 Total Fixed Expense D 700000 700000 700000 Net Income C-D 740000 1300000 960000 3a. Year 1 Year 2 Year 3 Variable Cost: Direct Material 26 26 26 Direct Labor 16 16 16 Variable Manu Ovh 5 5 5 Fixed Manu Ovh                    6.20                    6.71                    6.48 Unit Product Cost                 53.20                 53.71                 53.48 Fixed Manu Ovh Per Unit 570000/92000 570000/85000 570000/88000 3b. Year 1 Year 2 Year 3 Sale A 5112000 7100000 5893000 Less: Cost of Goods Sold Beginning Inventory 0         1,063,913             268,529 Add: Cost of Goods Manufactured         4,894,000         4,565,000 4,706,000.00 Cost of Goods Available for Sale         4,894,000         5,628,913         4,974,529 Less Closing Inventory         1,063,913             268,529             534,773 Cost of Goods Sold B         3,830,087         5,360,384         4,439,757 Gross Margin A-B         1,281,913         1,739,616         1,453,243 Less: Selling and Admin Expense Variable 288000 400000 332000 Fixed 130000 130000 130000 Net Income             863,913         1,209,616             991,243 4a. Year 1 Year 2 Year 3 Variable Cost: Direct Material 26 26 26 Direct Labor 16 16 16 Variable Manu Ovh 5 5 5 Fixed Manu Ovh                    6.20                    6.71                    6.48 Unit Product Cost                 53.20                 53.71                 53.48 4b. Year 1 Year 2 Year 3 Sale A 5112000 7100000 5893000 Less: Cost of Goods Sold Beginning Inventory 0         1,063,913             265,978 Add: Cost of Goods Manufactured         4,894,000         4,565,000 4,706,000.00 Cost of Goods Available for Sale         4,894,000         5,628,913         4,971,978 Less Closing Inventory         1,063,913             265,978             537,059 Cost of Goods Sold B         3,830,087         5,362,935         4,434,919 Gross Margin A-B         1,281,913         1,737,065         1,458,081 Less: Selling and Admin Expense Variable 288000 400000 332000 Fixed 130000 130000 130000 Net Income             863,913         1,207,065             996,081