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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
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 ($50 per unit) Cost of goods sold ($39 per unit) Gross profit Selling and administrative expenses Income Year 1 $ 1,350,000 1,053,000 297,000 247,000 $ 50,000 Year 2 $ 2,550,000 1,989,000 561,000 271,000 $ 290,000 Additional Information a. Sales and production data for these first two years follow. Units Units produced Units sold Year 1 39,000 27,000 Year 2 39,000 51,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $39 per unit product cost using absorption costing consists of the following. Direct Direct labor Variable overhead Fixed overhead ($351, 000/39,000 units) Total product cost per unit $ 16 9 5 9 $ 39 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 $ 27,000 220,000 $ 247,000 Year 2 $ 51,000 220,000 $ 271,000 Required: Prepare income statements for each of these two years under variable costing. (Loss amounts should be entered with a minus sign.) DOWELL Company Income Statements (Variable Costing) Year 1 Year 2 Sales Less: Variable expenses Income (Loss)
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