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[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
[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.
2016 | 2017 | |||||
Sales ($44 per unit) | $ | 968,000 | $ | 1,848,000 | ||
Cost of goods sold ($29 per unit) | 638,000 | 1,218,000 | ||||
Gross margin | 330,000 | 630,000 | ||||
Selling and administrative expenses | 294,500 | 339,500 | ||||
Net income | $ | 35,500 | $ | 290,500 | ||
Additional Information
- Sales and production data for these first two years follow.
2016 | 2017 | |||
Units produced | 32,000 | 32,000 | ||
Units sold | 22,000 | 42,000 | ||
- Variable cost per unit and total fixed costs are unchanged during 2016 and 2017. The company's $29 per unit product cost consists of the following.
Direct materials | $ | 6 | |
Direct labor | 8 | ||
Variable overhead | 5 | ||
Fixed overhead ($320,000/32,000 units) | 10 | ||
Total product cost per unit | $ | 29 | |
- Selling and administrative expenses consist of the following.
2016 | 2017 | |||||
Variable selling and administrative expenses ($2.25 per unit) | $ | 49,500 | $ | 94,500 | ||
Fixed selling and administrative expenses | 245,000 | 245,000 | ||||
Total selling and administrative expenses | $ | 294,500 | $ | 339,500 | ||
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.)
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