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

2014 2015

Sales($46per unit)......... . $920,000 $1,840,000

Cost of goods sold($31 per unit)............ $620,000 $1,240,000

Gross margine.............. 300,000 600,000

Selling and administrative expenses..... 290,000 340,000

Net income................ $ 10,000 $260,000

Additional Information

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

. 2014 . 2015

Units produced..................... 30,000 . 30,000

Units sold...................... 20,000 40,000

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.................................................. $5

Direct labor........................................................ 9

Variable overhead .............................................. 7

Fixed overhead ($300,000/30,000units)............... 10

Total product cost per unit.. ............................. $31

c.

2014 2015

Variable selling and administration expenses............................... $50,000 $100,000

fixed selling and administration expenses.................................... 240,000 240,000

Total selling and administration expenses.................................... 290,000 340,000

Required

1. Prepare income statements for the compony for each of its first two years under variable costing.

2. Explain any difference between the absorption costing income and the variable costing income foe these two year