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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 ($58 per unit) Cost of goods sold ($48 per unit) Gross profit Selling and administrative expenses Income: Additional Information Year 1 $ 1,914,000 1,584,000 330,000 223,000 a. Sales and production data for these first two years follow. $ 107,000 Year 2 $ 3,538,000 2,928,000 610,000 251,000 $ 359,000 Units Units produced Units sold Year 1 47,000 33,000 Year 2 47,000 61,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $48 per unit product cost using absorption costing consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($423,000/47,000 units) Total product cost per unit $17 17 5 9 $ 48 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 $ 33,000 190,000 $ 223,000 Year 2 $ 61,000 190,000 $251,000
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