Question
Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow. 20182019Sales ($44 per unit)$1,012,000$1,892,000Cost of
Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow.
20182019Sales ($44 per unit)$1,012,000$1,892,000Cost of goods sold ($29 per unit)667,0001,247,000Gross margin345,000645,000Selling and administrative expenses291,750336,750Net income$53,250$308,250
-Sales and Production Data
20182019Units produced33,00033,000Units sold23,00043,000
-Variable cost per unit and total fixed costs are unchanged. Company's $29 per unit production cost consists of the following:
Direct materials$6Direct labor9Variable overhead4Fixed overhead ($330,000/33,000 units)10Total product cost per unit$29
-Selling and Admin. expenses are:
20182019Variable selling and administrative expenses ($2.25 per unit)$51,750$96,750Fixed selling and administrative expenses240,000240,000Total selling and administrative expenses$291,750$336,750
1-Prepare income statements for the company for each of its first two years under variable costing
2-Prepare a table as in Exhibit 6.12 to convert variable costing income to absorption costing income for both 2018 and 2019.
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