Problem 06-1A Variable costing income statement and conversion to absorption costing income (two consecutive years) LO P2, P3 [The following information applies to the questions displayed below. Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow. Sales ($46 per unit) Cost of goods sold ($31 per unit) Gross margin Selling and administrative expenses 2018 2019 $966,000 $1,886,000 651,000 1,271,000 315,000 615,000 287,250 332,250 $ 27,750 $ 282,750 Net income Additional Information a. Sales and production data for these first two years follow. Units produced Units sold 2018 2019 31,000 31,000 21,000 41,000 b. Variable cost per unit and total fixed costs are unchanged during 2018 and 2019. The company's $31 per unit product cost consists of the following. Units sold 21,000 41,000 b. Variable cost per unit and total fixed costs are unchanged during 2018 and 2019. The company's $31 per unit product cost consists of the following. $ 6 Direct materials Direct labor Variable overhead Fixed overhead ($310,000/31,000 units) Total product cost per unit 6 10 $31 c. Selling and administrative expenses consist of the following. Variable selling and administrative expenses ($2.25 per unit) Fixed selling and administrative expenses Total selling and administrative expenses 2018 2019 $ 47,250 $ 92,250 240,000 240,000 $287,250 $332,250 oblem 06-1A Part 1 Dronare income statemente for the company for each of ite first two voare under variablecoctinence amountech 1. Prepare income statements for the company for each of its first two years under variable costing. (Loss amount entered with a minus sign.) DOWELL Company Variable Costing Income Statements 2018 2019 Sales $ 966,000 $ 1,886,000 Less: Variable costs Variable overhead 441,000 861,000 Variable selling and administrative expenses 47,250 92,250 Total variable costs 488,250 953,250 Contribution margin 477,750 932,750 Less: Fixed expenses Fixed overhead 310,000 310,000 245,000 Fixed selling and administrative costs 245,000 Total fixed expenses 555,000 555,000 Net income (loss) $ (77,250) $ 377,750 Problem 06-1A Part 2 2. Prepare a table as in Exhibit 6.12 to convert variable costing income to absorption costing income for both 2018 and 2019. (Loss amounts should be entered with a minus sign.) DOWELL COMPANY Reconciliation of Variable Costing Income to Absorption Costing Income 2018 2019 Variable costing income (loss) Add: Fixed overhead in ending inventory Less: Fixed overhead in ending inventory Absorption costing income (loss)