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 ($60 per unit). Year 1 $ Year 2 .$ 1,920,000 3,960,000 ed Cost of goods sold ($45 per unit) 1,440,000 2,970,000 Gross profit 480,000 990,000 Selling and administrative 338,000 474,000 expenses ok Income $ 142,000 $ 516,000 t Additional Information a. Sales and production data for these first two years follow. nces Units Units Year 1 Year 2 produced 49,000 49,000 Units sold 32,000 66,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $45 per unit product cost using absorption costing consists of the following. Direct materials Direct labor $ 12 19 Variable overhead Fixed overhead ($539,000/49,000 units) 3 11 Total product cost per unit $ 45 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 Year 1 Year 2 $ 128,000 $264,000 210,000 210,000 $ 338,000 $ 474,000 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) Income (Loss) 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 ($60 per unit). Year 1 $ Year 2 .$ 1,920,000 3,960,000 ed Cost of goods sold ($45 per unit) 1,440,000 2,970,000 Gross profit 480,000 990,000 Selling and administrative 338,000 474,000 expenses ok Income $ 142,000 $ 516,000 t Additional Information a. Sales and production data for these first two years follow. nces Units Units Year 1 Year 2 produced 49,000 49,000 Units sold 32,000 66,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $45 per unit product cost using absorption costing consists of the following. Direct materials Direct labor $ 12 19 Variable overhead Fixed overhead ($539,000/49,000 units) 3 11 Total product cost per unit $ 45 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 Year 1 Year 2 $ 128,000 $264,000 210,000 210,000 $ 338,000 $ 474,000 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) Income (Loss) Year 1 Year 2
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 ($60 per unit)
Year 1
$
Year 2
$
1,920,000 3,960,000
Cost of goods sold ($45 per unit) 1,440,000 2,970,000
Gross profit
480,000
990,000
Selling and administrative
expenses
ok
Income
t
338,000 474,000
$ 142,000 $ 516,000
Additional Information
a. Sales and production data for these first two years follow.
Year 1 Year 2
nces
Units
Units
produced
49,000
49,000
Units sold 32,000 66,000
b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $45 per unit
product cost using absorption costing consists of the following.
Direct materials
Direct labor
$ 12
19
Variable overhead
Fixed overhead ($539,000/49,000
units)
3
11
Total product cost per unit
$ 45
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
Required:
Year 1
Year 2
$ 128,000 $ 264,000
210,000 210,000
$ 338,000 $ 474,000
Prepare income statements for each of these two years under variable costing. (Loss amounts should be entered with
a minus sign.)
Income (Loss)
DOWELL Company
Income Statements (Variable Costing)
Year 1
Year 2
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