Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow. Income Statements (Absorption Costing) Year 1 Sales ($59 per unit) 1,652,000 4,012,000 Cost of goods sold ($43 per unit) 1,204,000 2,924,000 Gross profit 448,000 1,088,000 Selling and administrative 314,000 434,000 expenses Income $134,000 $654,000 Additional Information a. Sales and production data for these first two years follow. Units Year 1 Year 2 Units 48,000 48,000 produced Units sold 28,000 68,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $43 per unit product cost using absorption costing consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($480,000/48,000 units) Total product cost per unit $ 11 18 4 10 $ 43 c. Selling and administrative expenses consist of the following. Year 2 Selling and Administrative Expenses Variable selling and administrative ($3 per unit sold). Fixed selling and administrative Total Year 1 Year 2 $ 84,000 $ 204,000 230,000 230,000 $314,000 $434,000 Required: Prepare income statements for each of these two years under variable costing. (Loss amounts should be entered with a minus sign.)
Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow. Income Statements (Absorption Costing) Year 1 Sales ($59 per unit) 1,652,000 4,012,000 Cost of goods sold ($43 per unit) 1,204,000 2,924,000 Gross profit 448,000 1,088,000 Selling and administrative 314,000 434,000 expenses Income $134,000 $654,000 Additional Information a. Sales and production data for these first two years follow. Units Year 1 Year 2 Units 48,000 48,000 produced Units sold 28,000 68,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $43 per unit product cost using absorption costing consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($480,000/48,000 units) Total product cost per unit $ 11 18 4 10 $ 43 c. Selling and administrative expenses consist of the following. Year 2 Selling and Administrative Expenses Variable selling and administrative ($3 per unit sold). Fixed selling and administrative Total Year 1 Year 2 $ 84,000 $ 204,000 230,000 230,000 $314,000 $434,000 Required: Prepare income statements for each of these two years under variable costing. (Loss amounts should be entered with a minus sign.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Dowell Company produces a single product. Its income statements under absorption costing for its first two years of
operation follow.
Income Statements (Absorption
Costing)
Additional Information
a. Sales and production data for these first two years follow.
Units
Units
produced
Units sold 28,000
Year 1 Year 2
48,000 48,000
68,000
Sales ($59 per unit)
1,652,000
4,012,000
Cost of goods sold ($43 per unit) 1,204,000 2,924,000
Gross profit
448,000 1,088,000
Selling and administrative
314,000 434,000
expenses
Income
$ 134,000 $ 654,000
Year 1
Direct materials
Direct labor
Variable overhead
Fixed overhead ($480,000/48,000
units)
Total product cost per unit
b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $43 per unit
product cost using absorption costing consists of the following.
$
$ 11
18
4
10
$ 43
c. Selling and administrative expenses consist of the following.
Sales
Less: Variable expenses
Variable cost of goods sold
Fixed overhead
Year 2
Selling and Administrative Expenses
Variable selling and administrative ($3 per
unit sold)
Fixed selling and administrative
Total
$
Year 1
Year 2
$ 84,000 $ 204,000
230,000 230,000
$314,000 $434,000
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
$
$
1,652,000 4,012,000
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