Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow.

20162017Sales ($46 per unit)$1,104,000$2,024,000Cost of goods sold ($31 per unit)744,0001,364,000Gross margin360,000660,000Selling and administrative expenses300,000350,000Net income$60,000$310,000

Additional Information

1. Sales and production data for these first two years follow.

20162017Units produced 34,00034,000Units sold24,00044,000

1. Variable cost per unit and total fixed costs are unchanged during 2016 and 2017. The company's $31 per unit product cost consists of the following.

Direct materials$5Direct labor9Variable overhead7Fixed overhead ($340,000/34,000 units)10Total product cost per unit$31

1. Selling and administrative expenses consist of the following.

20162017Variable selling and administrative expenses ($2.5 per unit)$60,000$110,000Fixed selling and administrative expenses240,000240,000Total selling and administrative expenses$300,000$350,000

1.Complete income statements for the company for each of its first two years under variable costing.

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