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Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow. 2018 2019 Sales ($48 per
Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow.
2018 | 2019 | |||||
Sales ($48 per unit) | $ | 1,104,000 | $ | 2,064,000 | ||
Cost of goods sold ($33 per unit) | 759,000 | 1,419,000 | ||||
Gross margin | 345,000 | 645,000 | ||||
Selling and administrative expenses | 285,250 | 320,250 | ||||
Net income | $ | 59,750 | $ | 324,750 | ||
Additional Information
- Sales and production data for these first two years follow.
2018 | 2019 | |||
Units produced | 33,000 | 33,000 | ||
Units sold | 23,000 | 43,000 | ||
- Variable cost per unit and total fixed costs are unchanged during 2018 and 2019. The company's $33 per unit product cost consists of the following.
Direct materials | $ | 4 | |
Direct labor | 9 | ||
Variable overhead | 10 | ||
Fixed overhead ($330,000/33,000 units) | 10 | ||
Total product cost per unit | $ | 33 | |
- Selling and administrative expenses consist of the following.
2018 | 2019 | |||||
Variable selling and administrative expenses ($1.75 per unit) | $ | 40,250 | $ | 75,250 | ||
Fixed selling and administrative expenses | 245,000 | 245,000 | ||||
Total selling and administrative expenses | $ | 285,250 | $ | 320,250 | ||
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.)
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.)
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 Net income (loss) 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 Absorption costing income (loss)Step by Step Solution
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