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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)
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 ($60 per unit) Cost of goods sold ($45 per unit) Gross profit Selling and administrative expenses Income Additional Information a. Sales and production data for these first two years follow. Year 2 Year 1 $ 1,920,000 1,440,000 480,000 338,000 $ 3,960,000 2,970,000 990,000 474,000 $ 142,000 $ 516,000 Units Units produced Units sold Year 1 49,000 32,000 Year 2 49,000 66,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $45 per unit product cost using absorption costing consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($539,000/49,000 units) Total product cost per unit $ 12 19 3 11 $ 45 c. Selling and administrative expenses consist of the following. Selling and Administrative Expenses Variable selling and administrative ($4 per unit sold) Fixed selling and administrative Total Required: Year 1 Year 2 $ 128,000 210,000 $ 264,000 210,000 $ 338,000 $ 474,000 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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