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Required: Prepare income statements for each of these two years under variable costing. (Loss amounts should be entered with a minus sign.) DOWELL Company Income

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Required: Prepare income statements for each of these two years under variable costing. (Loss amounts should be entered with a minus sign.) DOWELL Company Income Statements (Variable Costing) Year 1 Year 2 Income (Loss) 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 ($55 per unit) Cost of goods sold ($42 per unit) Gross profit Selling and administrative expenses Income Year 1 $ 1,705,000 1,302,000 403,000 303,000 $ 100,000 Year 2 $ 3,135,000 2,394,000 741,000 381,000 $360,000 Additional Information a. Sales and production data for these first two years follow. Units Units produced Units sold Year 1 44,000 31,000 Year 2 44,000 57,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $42 per unit product cost using absorption costing consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($440,000/44,000 units) Total product cost per unit $ 14 14 4 10 $ 42 c. Selling and administrative expenses consist of the following. Selling and Administrative Expenses Variable selling and administrative ($3 per unit sold) Fixed selling and administrative Total Year 1 $ 93,000 210,000 $ 303,000 Year 2 $ 171,000 210,000 $ 381,000

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