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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)

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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) 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. Year 1 $ 966,000 Year 2 $ 2,254,000 1,519,000 651,000 315,000 281,000 735,000 309,000 $ 34,000 $ 426,000 Units Units produced Units sold Year 1 35,000 21,000 Year 2 35,000 49,000 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 ($315,000/35,000 units) Total product cost per unit $ 12 5 5 9 $ 31 c. Selling and administrative expenses consist of the following. Selling and Administrative Expenses Variable selling and administrative ($1 per unit sold) Fixed selling and administrative Total Year 1 $ 21,000 260,000 Year 2 $ 49,000 260,000 $ 281,000 $ 309,000 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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