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Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow. Income Statements (Absorption Costing) Year
Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow. Income Statements (Absorption Costing) Year 1 Year 2 Sales ($48 per unit) $ 1,248,000 $ 2,304,000 Cost of goods sold ($35 per unit) 910,000 1,680,000 Gross profit 338,000 624,000 Selling and administrative expenses 304,000 392,000 Income $ 34,000 $ 232,000 Additional Information Sales and production data for these first two years follow. Units Year 1 Year 2 Units produced 37,000 37,000 Units sold 26,000 48,000 Variable costs per unit and fixed costs per year are unchanged during these years. The company's $35 per unit product cost using absorption costing consists of the following. Direct materials $ 14 Direct labor 7 Variable overhead 3 Fixed overhead ($407,000/37,000 units) 11 Total product cost per unit $ 35 Selling and administrative expenses consist of the following. Selling and Administrative Expenses Year 1 Year 2 Variable selling and administrative ($4 per unit sold) $ 104,000 $ 192,000 Fixed selling and administrative 200,000 200,000 Total $ 304,000 $ 392,000 Required: Prepare income statements for each of these two years under variable costing. (Loss amounts should be entered with a minus sign.)
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