Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follo Income Statements (Absorption Costing) Sales ($48 per unit) Cost of goods sold ($35 per unit) Gross profit Selling and administrative expenses Income Additional Information a. Sales and production data for these first two years follow. Units Units produced Units sold Year 1 37,000 26,000 Year 2 37,000 48,000 Year 1 $ 1,248,000 910,000 338,000 304,000 $ 34,000 Direct materials Direct labor Variable overhead Fixed overhead ($407,000/37,000 units) Total product cost per unit b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $35 per unit product cost using absorption costing consists of the following. $ 14 7 3 Selling and Administrative Expenses Variable selling and administrative ($4 per unit sold) Fixed selling and administrative Total 11 $ 35 c. Selling and administrative expenses consist of the following. Year 2 $ 2,304,000 1,680,000 624,000 392,000 $ 232,000 Required: Prepare income statements for each of these two years under variable costing Note: Loss amounts should be entered with a minus sign. Year 1 $ 104,000 200,000 $ 304,000 Year 2 $ 192,000 200,000 $ 392,000
Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follo Income Statements (Absorption Costing) Sales ($48 per unit) Cost of goods sold ($35 per unit) Gross profit Selling and administrative expenses Income Additional Information a. Sales and production data for these first two years follow. Units Units produced Units sold Year 1 37,000 26,000 Year 2 37,000 48,000 Year 1 $ 1,248,000 910,000 338,000 304,000 $ 34,000 Direct materials Direct labor Variable overhead Fixed overhead ($407,000/37,000 units) Total product cost per unit b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $35 per unit product cost using absorption costing consists of the following. $ 14 7 3 Selling and Administrative Expenses Variable selling and administrative ($4 per unit sold) Fixed selling and administrative Total 11 $ 35 c. Selling and administrative expenses consist of the following. Year 2 $ 2,304,000 1,680,000 624,000 392,000 $ 232,000 Required: Prepare income statements for each of these two years under variable costing Note: Loss amounts should be entered with a minus sign. Year 1 $ 104,000 200,000 $ 304,000 Year 2 $ 192,000 200,000 $ 392,000
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)
Sales ($48 per unit)
Cost of goods sold ($35 per unit)
Gross profit
Selling and administrative expenses
Income
Additional Information
a. Sales and production data for these first two years follow.
Units
Units produced
Units sold
Direct materials
Direct labor
Year 1
37,000
26,000
Year 2
37,000
48,000
b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $35 per unit product cost
using absorption costing consists of the following.
Variable overhead
Fixed overhead ($407,000/37,000 units)
Total product cost per unit
Year 1
$ 1,248,000
910,000
338,000
304,000
$ 34,000
Income (Loss)
c. Selling and administrative expenses consist of the following.
Selling and Administrative Expenses
Variable selling and administrative ($4 per unit sold)
Fixed selling and administrative
Total
DOWELL Company
Income Statements (Variable Costing)
$14
7
3
11
$35
Required:
Prepare income statements for each of these two years under variable costing.
Note: Loss amounts should be entered with a minus sign.
Year 1
Year 2
$ 2,304,000
1,680,000
624,000
392,000
$ 232,000
Year 2
Year 1
$ 104,000
200,000
$ 304,000
Year 2
$ 192,000
200,000
$ 392,000
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