Campbell & Orlich Industries C&O Industries

Campbell & Orlich Industries
C&O Industries is an innovative technology company that designs, produces, manufactures, and
distributes chip wafers used in the semiconductor manufacturing processes of firms such as
NVIDIA, Micron Technology, and AMD. It has concentrated its operations to the point where it
is taking advantage of full scale economies afforded by producing a single product for its entire
operational base: WAFX470. Since there is a very strong market for the companys product split
between three customers, expectation are running high that C&O will be running at full capacity
for the next several years and may undertake steps to increase its capacity to meet escalating
demand; the major concern being product quality as management desires wafer specification to
be within 1/1,000,000,000 of a micron.

Over the past three years of operations, which were the first three years of existence for the
organization, the following data were relevant to operations:

Per Unit Variable Costs:
Manufacturing:
DM
DL
MO-Variable
Selling & Administrative
Annual Fixed Costs:
Manufacturing Overhead
Selling & Administrative Costs

$30
$18
$6
$4
$600,000
$180,000

C&O sells its chip wafer for $70/unit for which the following data pertain to the operational
relationship between production and sales:

Year
1
2
3

Production (Units)
100,000
75,000
80,000

Sales (Units)
80,000
90,000
75,000

Requirement #1:
The cost flow assumption is assumed to be FIFO (oldest Units sold first) and Variable
Costing is to be used.
A. You are to calculate the per unit cost for each of the three years being discussed
B. You are to prepare an income statement for each of the three years being discussed

Requirement #2:
The cost flow assumption is assumed to be LIFO (newest Units sold first) and Variable
Costing is to be used.
A. You are to calculate the per unit cost for each of the three years being discussed
B. You are to prepare an income statement for each of the three years being discussed
C. Explain the reason for the unusual results between requirements 1&2 above

Requirement #3:
The cost flow assumption is assumed to be FIFO (oldest Units sold first) and Absorption
Costing is to be used.
A. You are to calculate the per unit cost for each of the three years being discussed
B. You are to prepare an income statement for each of the three years being discussed

Requirement #4:
The cost flow assumption is assumed to be LIFO (newest Units sold first) and Absorption
Costing is to be used.
A. You are to calculate the per unit cost for each of the three years being discussed
B. You are to prepare an income statement for each of the three years being discussed