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 ($59 per unit) Cost of goods sold ($43 per unit) Gross profit Selling and administrative expenses Income Year 1 $ 1,652,000 1,204,000 448,000 314,000 Year 2 $ 4,012,000 2,924,000 1,088,000 434,000 $ 134,000 $ 654,000 Additional Information a. Sales and production data for these first two years follow. Units Units produced Units sold Year 1 48,000 28,000 Year 2 48,000 68,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $43 per unit product cost using absorption costing consists of the following. Direct materials $ 11 Direct labor 18 Variable overhead 4 Fixed overhead ($480,000/48,000 units) 10 Total product cost per unit $ 43 c. Selling and administrative expenses consist of the following. Selling and Administrative Expenses Variable selling and administrative ($3 per unit sold) Fixed selling and administrative Total Year 1 Year 2 $ 204,000 230,000 $ 84,000 230,000 $ 314,000 $ 434,000
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