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

2014 2015

Sales ($46 per unit) $ 1,150,000 $ 2,070,000

Cost of goods sold ($31 per unit) 775,000 1,395,000

Gross margin 375,000 675,000

Selling and administrative expenses 290,000 330,000

Net income $ 85,000 $ 345,000

Additional Information

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

2014 2015

Units produced 35,000 35,000

Units sold 25,000 45,000

b. Variable cost per unit and total fixed costs are unchanged during 2014 and 2015. The company's $31 per unit product cost consists of the following.

Direct materials $ 4

Direct labor 8

Variable overhead 9

Fixed overhead ($350,000/35,000 units) 10

Total product cost per unit $ 31

c. Selling and administrative expenses consist of the following.

2014 2015

Variable selling and administrative expenses ($2 per unit) $ 50,000 $ 90,000

Fixed selling and administrative expenses 240,000 240,000

Total selling and administrative expenses $ 290,000 $ 330,000

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