Required information Problem 6-1A 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 Net income 2016 2017 $966,000 $1,886,000 651,000 1,271,000 315,000 615,000 287,250 332,250 $ 27,750 $ 282,750 Additional Information a. Sales and production data for these first two years follow. Units produced Units sold 2016 2017 31,000 31,000 21,000 41,000 b. Variable cost per unit and total fixed costs are unchanged during 2016 and 2017. The company's $31 per unit product cost consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($310,000/31,000 units) Total product cost per unit 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 2016 2017 $ 47,250 $ 92,250 240,000 240,000 $287,250 $332,250 Problem 6-1A Part 1 1. Complete income statements for the company for each of its first two years under variable costing. (Loss amounts should be entered with a minus sign.) DOWELL Company Variable Costing Income Statements 2016 2017 Net income (loss) 2. What are the differences between the absorption costing income and the variable costing income for these two years? (Loss amounts should be entered with a minus sign.) DOWELL COMPANY Reconciliation of Variable Costing Income to Absorption Costing Income 2016 2017 Variable costing income (loss) Absorption costing income (loss)