Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow Sales ($46 per unit) Cost of goods sold ($31 per unit) Gross margin Selling and administrative expenses Net income 2018 2019 $1,012,000 $1,932,000 682,000 1,302,000 330,000 630,000 289,000 329,000 $ 41,000 301,000 Additional Information a. Sales and production data for these first two years follow. Units produced Units sold 2018 32,000 22,000 2019 32,000 42,000 b. Variable cost per unit and total fixed costs are unchanged during 2018 and 2019. The company's $31 per unit product cost consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($320,000/32,000 units) Total product cost per unit $ 4 9 8 10 $31 = c. Selling and administrative expenses consist of the following. Variable selling and administrative expenses ($2 per unit) Fixed selling and administrative expenses Total selling and administrative expenses 2018 2019 $ 44,000 $ 84,000 245,000 245,000 $289,000 $329,000 Problem 06-1A Part 1 1. Prepare income statements for the company for each of its first two years under variable costing. (Loss amounts should be entered with a minus sign.) DOWELL Company Variable Costing Income Statements 2018 2019 Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow Sales ($46 per unit) Cost of goods sold ($31 per unit) Gross margin Selling and administrative expenses Net income 2018 2019 $1,012,000 $1,932,000 682,000 1,302,000 330,000 630,000 289,000 329,000 $ 41,000 $ 301,000 Additional Information a. Sales and production data for these first two years follow. Units produced Units sold 2018 32,000 22,000 2019 32,000 42,000 b. Variable cost per unit and total fixed costs are unchanged during 2018 and 2019. The company's $31 per unit product cost consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($320,000/32,000 units) Total product cost per unit 9 8 "EL $31 c. Selling and administrative expenses consist of the following. Variable selling and administrative expenses ($2 per unit) Fixed selling and administrative expenses Total selling and administrative expenses 2018 2019 $ 44,000 $ 84,000 245,000 245,000 $289,000 $329,000 Problem 06-1A Part 2 2. Prepare a table as in Exhibit 6.12 to convert variable costing income to absorption costing income for both 2018 and 2019. (Loss amounts should be entered with a minus sign.) DOWELL COMPANY Reconciliation of Variable Costing Income to Absorption Costing Income 2018 Variable costing income (loss) 2019