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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 ($52 per unit) Cost of goods sold ($36 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 Variable overhead Year 1 41,000 29,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $36 per unit product cost using absorption costing consists of the following. Fixed overhead ($451,000/41,000 units) Total product cost per unit Year 2 41,000 53,000 Sales Less: Variable expenses c. Selling and administrative expenses consist of the following. Year 1 $ 1,508,000 1,044,000 464,000 366,000 $ 98,000 Selling and Administrative Expenses Variable selling and administrative ($4 per unit sold) Fixed selling and administrative Total Contribution margin Less: Fixed expenses DOWELL Company Income Statements (Variable Costing) Variable cost of goods sold Variable selling and administrative expenses $11 11 3 11 $36 Fixed overhead Fixed selling and administrative expenses Required: Prepare income statements for each of these two years under variable costing. (Loss amounts should be entered with a minus sign.) Year 2 $ 2,756,000 1,908,000 848,000 462,000 $386,000 Year 1 $ 1,508,000 Year 1 $ 116,000 250,000 $366,000 Year 2 $2,756,000 Year 2 $ 212,000 250,000 $462,000

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 ($52 per unit) Cost of goods sold ($36 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 Variable overhead Year 1 41,000 29,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $36 per unit product cost using absorption costing consists of the following. Fixed overhead ($451,000/41,000 units) Total product cost per unit Year 2 41,000 53,000 Sales Less: Variable expenses c. Selling and administrative expenses consist of the following. Year 1 $ 1,508,000 1,044,000 464,000 366,000 $ 98,000 Selling and Administrative Expenses Variable selling and administrative ($4 per unit sold) Fixed selling and administrative Total Contribution margin Less: Fixed expenses DOWELL Company Income Statements (Variable Costing) Variable cost of goods sold Variable selling and administrative expenses $11 11 3 11 $36 Fixed overhead Fixed selling and administrative expenses Required: Prepare income statements for each of these two years under variable costing. (Loss amounts should be entered with a minus sign.) Year 2 $ 2,756,000 1,908,000 848,000 462,000 $386,000 Year 1 $ 1,508,000 Year 1 $ 116,000 250,000 $366,000 Year 2 $2,756,000 Year 2 $ 212,000 250,000 $462,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 ($52 per unit) Cost of goods sold ($36 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 Variable overhead. Year 1 41,000 29,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $36 per unit product cost using absorption costing consists of the following. Fixed overhead ($451,000/41,000 units) Total product cost per unit Year 2 41,000 53,000 Sales Less: Variable expenses 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 Contribution margin Less: Fixed expenses Year 1 $ 1,508,000 1,044,000 464,000 366,000 $ 98,000 Variable cost of goods sold Variable selling and administrative expenses Income (Loss) DOWELL Company Income Statements (Variable Costing) Fixed overhead Fixed selling and administrative expenses $11 11 3 11 $36 Required: Prepare income statements for each of these two years under variable costing. (Loss amounts should be entered with a minus sign.) Year 2 $ 2,756,000 1,908,000 848,000 462,000 $386,000 Year 1 $ 1,508,000 Year 1 $ 116,000 250,000 $366,000 Year 2 $2,756,000 Year 2 $ 212,000 250,000 $462,000
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 ($52 per unit) Cost of goods sold ($36 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 Variable overhead. Year 1 41,000 29,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $36 per unit product cost using absorption costing consists of the following. Fixed overhead ($451,000/41,000 units) Total product cost per unit Year 2 41,000 53,000 Sales Less: Variable expenses 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 Contribution margin Less: Fixed expenses Year 1 $ 1,508,000 1,044,000 464,000 366,000 $ 98,000 Variable cost of goods sold Variable selling and administrative expenses Income (Loss) DOWELL Company Income Statements (Variable Costing) Fixed overhead Fixed selling and administrative expenses $11 11 3 11 $36 Required: Prepare income statements for each of these two years under variable costing. (Loss amounts should be entered with a minus sign.) Year 2 $ 2,756,000 1,908,000 848,000 462,000 $386,000 Year 1 $ 1,508,000 Year 1 $ 116,000 250,000 $366,000 Year 2 $2,756,000 Year 2 $ 212,000 250,000 $462,000
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