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 2 Sales ($57 per unit) Cost of goods sold ($46 per unit) $ 3,420,000 2, 760, 000 660,000 300,000 $ 360,000 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 46,000 32, 000 Year 2 46,000 60, 000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $46 per unit product cost using absorption costing consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($368, 000/46,000 units) Total product cost per unit Year 1 $ 1,824,000 1,472,000 352, 000 244, 000 $ 108,000 c. Selling and administrative expenses consist of the following. Sales Less: Variable expenses Variable cost of goods sold Selling and Administrative Expenses Variable selling and administrative ($2 per unit sold) Fixed selling and administrative Total Income (Loss) $ 16 16 6 8 $46 DOWELL Company Income Statements (Variable Costing) Required: Prepare income statements for each of these two years under variable costing. (Loss amounts should be entered with a minus sign.) Contribution margin Less: Fixed expenses Fixed overhead Fixed selling and administrative expenses Answer is not complete. Year 1 1,824,000 Year 2 Year 1 $ 64,000 180, 000 $ 244,000 3,420,000 Year 2 $ 120,000 180,000 $ 300,000
Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow. Income Statements (Absorption Costing) Year 2 Sales ($57 per unit) Cost of goods sold ($46 per unit) $ 3,420,000 2, 760, 000 660,000 300,000 $ 360,000 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 46,000 32, 000 Year 2 46,000 60, 000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $46 per unit product cost using absorption costing consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($368, 000/46,000 units) Total product cost per unit Year 1 $ 1,824,000 1,472,000 352, 000 244, 000 $ 108,000 c. Selling and administrative expenses consist of the following. Sales Less: Variable expenses Variable cost of goods sold Selling and Administrative Expenses Variable selling and administrative ($2 per unit sold) Fixed selling and administrative Total Income (Loss) $ 16 16 6 8 $46 DOWELL Company Income Statements (Variable Costing) Required: Prepare income statements for each of these two years under variable costing. (Loss amounts should be entered with a minus sign.) Contribution margin Less: Fixed expenses Fixed overhead Fixed selling and administrative expenses Answer is not complete. Year 1 1,824,000 Year 2 Year 1 $ 64,000 180, 000 $ 244,000 3,420,000 Year 2 $ 120,000 180,000 $ 300,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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1 part 2
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)
Year 2
Sales ($57 per
unit)
Cost of goods sold ($46 per unit)
$ 3,420,000
2, 760, 000
660,000
300,000
$ 360,000
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
46,000
32, 000
Year 2
46,000
60, 000
b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $46 per unit product cost using
absorption costing consists of the following.
Direct materials
Direct labor
Variable overhead
Fixed overhead ($368, 000/46,000 units)
Total product cost per unit
Year 1
$ 1,824,000
1,472,000
352, 000
244, 000
$ 108,000
c. Selling and administrative expenses consist of the following.
Sales
Less: Variable expenses
Variable cost of goods sold
Selling and Administrative Expenses
Variable selling and administrative ($2 per unit sold)
Fixed selling and administrative
Total
Income (Loss)
$ 16
16
6
8
$46
DOWELL Company
Income Statements (Variable Costing)
Required:
Prepare income statements for each of these two years under variable costing. (Loss amounts should be entered with a minus sign.)
Contribution margin
Less: Fixed expenses
Fixed overhead
Fixed selling and administrative expenses
Answer is not complete.
Year 1
1,824,000
Year 2
Year 1
$ 64,000
180, 000
$ 244,000
3,420,000
Year 2
$ 120,000
180,000
$ 300,000
Expert Solution
Step 1
Variable Cost :— It is the cost that changes with change in units.
Variable cost of goods sold is calculated as follows:—
Variable cost of goods sold = Beginning Inventory of Finished Goods + Units Produced — Ending Inventory of Finished Goods
Product Cost :— Product Cost under variable costing includes only variable manufacturing costs.
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