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) Year 2 Year 1 $ 1,508,000 1,044,000 $ 2,756,000 1,908,000 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 41,000 29,000 Year 2 41,000 53,000 464,000 366,000 848,000 462,000 $ 98,000 $ 386,000 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. Direct materials Direct labor Variable overhead Fixed overhead ($451,000/41,000 units) Total product cost per unit $ 11 11 3 11 $ 36 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 $ 116,000 250,000 Year 2 $ 212,000 250,000 $ 366,000 $ 462,000 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) Year 1 $ 1,508,000 $2,750,000 Year 2 Sales Less: Fixed expenses Fixed selling and administrative expenses Sales Plus: Variable expenses 451,000 1 Variable cost of goods sold 250,000 250,000 Fixed selling and administrative expenses 701,000 701,000 Income (Loss) $ 34,000 $ 18,000
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) Year 2 Year 1 $ 1,508,000 1,044,000 $ 2,756,000 1,908,000 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 41,000 29,000 Year 2 41,000 53,000 464,000 366,000 848,000 462,000 $ 98,000 $ 386,000 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. Direct materials Direct labor Variable overhead Fixed overhead ($451,000/41,000 units) Total product cost per unit $ 11 11 3 11 $ 36 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 $ 116,000 250,000 Year 2 $ 212,000 250,000 $ 366,000 $ 462,000 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) Year 1 $ 1,508,000 $2,750,000 Year 2 Sales Less: Fixed expenses Fixed selling and administrative expenses Sales Plus: Variable expenses 451,000 1 Variable cost of goods sold 250,000 250,000 Fixed selling and administrative expenses 701,000 701,000 Income (Loss) $ 34,000 $ 18,000
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 ($52 per unit)
Cost of goods sold ($36 per unit)
Year 2
Year 1
$ 1,508,000
1,044,000
$ 2,756,000
1,908,000
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
41,000
29,000
Year 2
41,000
53,000
464,000
366,000
848,000
462,000
$ 98,000
$ 386,000
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.
Direct materials
Direct labor
Variable overhead
Fixed overhead ($451,000/41,000 units)
Total product cost per unit
$ 11
11
3
11
$ 36
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
$ 116,000
250,000
Year 2
$ 212,000
250,000
$ 366,000
$ 462,000
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)
Year 1
$ 1,508,000 $2,750,000
Year 2
Sales
Less: Fixed expenses
Fixed selling and administrative expenses
Sales
Plus: Variable expenses
451,000
1
Variable cost of goods sold
250,000
250,000
Fixed selling and administrative expenses
701,000
701,000
Income (Loss)
$
34,000 $
18,000
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