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 1Year 2Sales ($47 per unit)$ 1,175,000$ 2,209,000Cost of goods sold ($33 per unit)825,0001,551,000Gross profit350,000658,000Selling and administrative expenses285,000351,000Income$ 65,000$ 307,000Additional InformationSales and production data for these first two years follow. UnitsYear 1Year 2Units produced36,00036,000Units sold25,00047,000 Variable costs per unit and fixed costs per year are unchanged during these years. The company's $33 per unit product cost using absorption costing consists of the following. Direct materials$ 13Direct labor6Variable overhead4Fixed overhead ($360,000/36,000 units)10Total product cost per unit$ 33 Selling and administrative expenses consist of the following.Selling and Administrative ExpensesYear 1Year 2Variable selling and administrative ($3 per unit sold)$ 75,000$ 141,000Fixed selling and administrative210,000210,000Total$ 285,000$ 351,000Prepare income statements for each of these two years under variable costing. (Loss amounts should be entered with a minus sign.) DOWELL CompanyIncome Statements (Variable Costing) Year 1Year 2 Income (Loss)

Answered: Dowell Company produces a single…

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Chapter3: Cost Behavior And Cost Forecasting

Section: Chapter Questions

Problem 54E: Income Statements under Absorption and Variable Costing In the coming year, Kalling Company expects...

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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)	Year 1	Year 2
Sales ($47 per unit)	$ 1,175,000	$ 2,209,000
Cost of goods sold ($33 per unit)	825,000	1,551,000
Gross profit	350,000	658,000
Selling and administrative expenses	285,000	351,000
Income	$ 65,000	$ 307,000

Additional Information

Sales and production data for these first two years follow.

Units	Year 1	Year 2
Units produced	36,000	36,000
Units sold	25,000	47,000

Variable costs per unit and fixed costs per year are unchanged during these years. The company's $33 per unit product cost using absorption costing consists of the following.

Direct materials	$ 13
Direct labor	6
Variable overhead	4
Fixed overhead ($360,000/36,000 units)	10
Total product cost per unit	$ 33

Selling and administrative expenses consist of the following.

Selling and Administrative Expenses	Year 1	Year 2
Variable selling and administrative ($3 per unit sold)	$ 75,000	$ 141,000
Fixed selling and administrative	210,000	210,000
Total	$ 285,000	$ 351,000

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	Year 2










Income (Loss)

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