Question
Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow. Income Statements (Absorption Costing).
Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow. Income Statements (Absorption Costing). Sales ($46 per unit) Cost of goods sold ($31 per unit) Gross profit Selling and administrative expenses Income Additional Information a. Sales and production data for these first two years follow. Units Units produced Units sold Year 1 30,000 20,000 Year 2 30,000 40,000 Year 1 $920,000 Year 2 $ 1,840,000 1,240,000 620,000 600,000 220,000 300,000 170,000 $ 130,000 $ 380,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $31 per unit product cost using absorption costing consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($300,000/30,000 units) Total product cost per unit $ 5 9 7 10 $ 31 c. Selling and administrative expenses consist of the following Selling and Administrative Expenses Variable selling and administrative ($2.50 per unit sold) Fixed selling and administrative Total Year 11 Year 21 $ 100,000 120,000 $ 50,000 120,000 $170,000 $220,000 Check my es Total product cost per unit $ 31 c. Selling and administrative expenses consist of the following. Selling and Administrative Expenses Variable selling and administrative ($2.50 per unit sold) Fixed selling and administrative Total Year 1 $ 50,000 120,000 $170,000 Year 2 $ 100,000 120,000 $220,000 Required: Prepare income statements for each of these two years under variable costing. (Loss amounts should be entered with a minus sign.) Income (Loss) DOWELL Company Income Statements (Variable Costing) Year 1 Year 2
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