Question
Required information Problem 19-1A Variable costing income statement and conversion to absorption costing income (two consecutive years) LO P2, P3 [The following information applies to
Required information
Problem 19-1A 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.
2018 | 2019 | |||||
Sales ($46 per unit) | $ | 966,000 | $ | 1,886,000 | ||
Cost of goods sold ($31 per unit) | 651,000 | 1,271,000 | ||||
Gross margin | 315,000 | 615,000 | ||||
Selling and administrative expenses | 292,500 | 342,500 | ||||
Net income | $ | 22,500 | $ | 272,500 | ||
Additional Information
- Sales and production data for these first two years follow.
2018 | 2019 | |||
Units produced | 31,000 | 31,000 | ||
Units sold | 21,000 | 41,000 | ||
- 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.
Direct materials | $ | 4 | |
Direct labor | 8 | ||
Variable overhead | 9 | ||
Fixed overhead ($310,000/31,000 units) | 10 | ||
Total product cost per unit | $ | 31 | |
- Selling and administrative expenses consist of the following.
2018 | 2019 | |||||
Variable selling and administrative expenses ($2.5 per unit) | $ | 52,500 | $ | 102,500 | ||
Fixed selling and administrative expenses | 240,000 | 240,000 | ||||
Total selling and administrative expenses | $ | 292,500 | $ | 342,500 | ||
Problem 19-1A Part 2
2. Prepare a table as in Exhibit 19.12 to convert variable costing income to absorption costing income for both 2018 and 2019. (Loss amounts should be entered with a minus sign.)
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