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Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow Sales ($48 per unit) Cost
Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow Sales ($48 per unit) Cost of goods sold ($33 per unit) Gross margin Selling and administrative expenses Net income 2016 2017 $1,152,000 $2,112,000 792,000 1,452,000 360,000 660,000 282,000 317,000 $ 78,000 $ 343,000 Additional Information a. Sales and production data for these first two years follow. 2017 Units produced Units sed 2016 34,800 24,000 34,000 44,000 b. Variable cost per unit and total fixed costs are unchanged during 2016 and 2017. The company's $33 per unit product cost consists of the following. 6 8 9 Direct materials Direct labor Variable overhead Fixed overhead ($340, eee/34,000 units) Total product cost per unit 10 $33 c. Selling and administrative expenses consist of the following. Variable selling and administrative expenses ($1.75 per unit) Fixed selling and administrative expenses Total selling and administrative expenses 2016 $ 42,200 $ 77,000 240,000 240,000 $282,000 $317,200 2. What are the differences between the absorption costing income and the variable costing income for these two years? (Loss amounts should be entered with a minus sign.) 2. What are the differences between the absorption costing income and the variable costing income for these two years amounts should be entered with a minus sign.) DOWELL COMPANY Reconciliation of Variable Costing Income to Absorption Costing Income 2016 2017 Variable costing income (loss) Add: Fixed overhead in ending inventory Less Fixed overhead in beginning inventory Absorption costing income loss)
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