Required Informetlon IThe following Information applies to t

Required Informetlon IThe following Information applies to the questions displayed belowj Inner Secret T Shirt Company produces and sells one product. The following Information pertains to each of the company\'s first three years of operations: Variable costs per unit: Manufacturing: $26 $14 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses $578,809 $198,80 During its first year of operations, O\'Brien produced 99,000 units and sold 74,000 units. During its second year of operatlons, it produced 81,000 units and sold 101,000 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 $72 per unit.

Solution

Compute the Variable costing Unit Product cost Year 1 Year 2 Year 3 Direct Material 26 26 26 Direct labour 14 14 14 Variable Manufacturing overheads 4 4 4 Variable costing unit prroduct cost 44 44 44 Construct The Variable Costing Income Statement under LIFO YEAR 1 YEAR 2 Year 3 Sales 5,328,000 7,272,000 5,472,000 Less: Variable cost     Direct Material 1924000 2626000 1976000     Direct Labor 1036000 1414000 1064000     Variable Manufacturing OH 296,000 404,000 304,000    Variable selling expense 148,000 202,000 152,000 Total variable expense 3,404,000 4,646,000 3,496,000 Contribution margin 1,924,000 2,626,000 1,976,000 Fixed expense:    Fixed Manufacturing overheads 570,000 570000 570000    Fixed selling expense 190,000 190000 190000 Total Fixed expense 760,000 760,000 760,000 Net operating Income 1,164,000 1,866,000 1,216,000