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 ($58 per unit) Cost of goods sold ($48 per unit) Gross profit Selling and administrative expenses Income Year 1 Year 2 $ 1,914,000 $ 3,538,000 2,928,000 1,584,000 330,000 223,000 610,000 251,000 $ 107,000 $ 359,000 Additional Information a. Sales and production data for these first two years follow. Units Units produced Units sold Year 1 47,000 33,000 Year 2 47,000 61,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $48 per unit product cost using absorption costing consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($423,000/47,000 units) Total product cost per unit $ 17 17 5 9 $ 48 c. Selling and administrative expenses consist of the following. Selling and Administrative Expenses Variable selling and administrative ($1 per unit sold) Fixed selling and administrative Total Year 1 $ 33,000 190,000 $ 223,000 Year 2 $ 61,000 190,000 $ 251,000 Required: Prepare income statements for each of these two years under variable costing. Note: Loss amounts should be entered with a minus sign. DOWELL Company Income Statements (Variable Costing) Year 1 Year 2
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 ($58 per unit) Cost of goods sold ($48 per unit) Gross profit Selling and administrative expenses Income Year 1 Year 2 $ 1,914,000 $ 3,538,000 2,928,000 1,584,000 330,000 223,000 610,000 251,000 $ 107,000 $ 359,000 Additional Information a. Sales and production data for these first two years follow. Units Units produced Units sold Year 1 47,000 33,000 Year 2 47,000 61,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $48 per unit product cost using absorption costing consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($423,000/47,000 units) Total product cost per unit $ 17 17 5 9 $ 48 c. Selling and administrative expenses consist of the following. Selling and Administrative Expenses Variable selling and administrative ($1 per unit sold) Fixed selling and administrative Total Year 1 $ 33,000 190,000 $ 223,000 Year 2 $ 61,000 190,000 $ 251,000 Required: Prepare income statements for each of these two years under variable costing. Note: Loss amounts should be entered with a minus sign. DOWELL Company Income Statements (Variable Costing) Year 1 Year 2
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 ($58 per unit)
Cost of goods sold ($48 per unit)
Gross profit
Selling and administrative expenses
Income
Year 1
Year 2
$ 1,914,000
$ 3,538,000
2,928,000
1,584,000
330,000
223,000
610,000
251,000
$ 107,000
$ 359,000
Additional Information
a. Sales and production data for these first two years follow.
Units
Units produced
Units sold
Year 1
47,000
33,000
Year 2
47,000
61,000
b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $48 per unit product cost
using absorption costing consists of the following.
Direct materials
Direct labor
Variable overhead
Fixed overhead ($423,000/47,000 units)
Total product cost per unit
$ 17
17
5
9
$ 48
c. Selling and administrative expenses consist of the following.
Selling and Administrative Expenses
Variable selling and administrative ($1 per unit sold)
Fixed selling and administrative
Total
Year 1
$ 33,000
190,000
$ 223,000
Year 2
$ 61,000
190,000
$ 251,000
Required:
Prepare income statements for each of these two years under variable costing.
Note: Loss amounts should be entered with a minus sign.
DOWELL Company
Income Statements (Variable Costing)
Year 1
Year 2
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