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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)

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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 ($54 per unit) Cost of goods sold ($40 per unit) Year 1 $ 1,512,000 1,120,000 Gross profit Selling and administrative expenses Income Additional Information a. Sales and production data for these first two years follow. Year 2 $ 3,132,000 392,000 293,000 2,320,000 812,000 323,000 $ 99,000 $ 489,000 Units Units produced Units sold Year 1 Year 2 43,000 58,000 43,000 28,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $40 per unit product cost using absorption costing consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($387,008/43,000 units) Total product cost per unit $ 13 13 5 9 $ 40 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 Required: Prepare income statements for each of these two years under variable costing. Note: Loss amounts should be entered with a minus sign. Year 1 $ 28,000 265,000 $293,000 Year 2 $ 58,000 265,000 $ 323,000 Sales Less: Variable expenses Income (Loss) DOWELL Company Income Statements (Variable Costing) Year 1 Year 2

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