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Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follo Income Statements (Absorption Costing) Sales ($48 per unit) Cost of goods sold ($35 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 Year 1 37,000 26,000 Year 2 37,000 48,000 Year 1 $ 1,248,000 910,000 338,000 304,000 $ 34,000 Direct materials Direct labor Variable overhead Fixed overhead ($407,000/37,000 units) Total product cost per unit b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $35 per unit product cost using absorption costing consists of the following. $ 14 7 3 Selling and Administrative Expenses Variable selling and administrative ($4 per unit sold) Fixed selling and administrative Total 11 $ 35 c. Selling and administrative expenses consist of the following. Year 2 $ 2,304,000 1,680,000 624,000 392,000 $ 232,000 Required: Prepare income statements for each of these two years under variable costing Note: Loss amounts should be entered with a minus sign. Year 1 $ 104,000 200,000 $ 304,000 Year 2 $ 192,000 200,000 $ 392,000

Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follo Income Statements (Absorption Costing) Sales ($48 per unit) Cost of goods sold ($35 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 Year 1 37,000 26,000 Year 2 37,000 48,000 Year 1 $ 1,248,000 910,000 338,000 304,000 $ 34,000 Direct materials Direct labor Variable overhead Fixed overhead ($407,000/37,000 units) Total product cost per unit b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $35 per unit product cost using absorption costing consists of the following. $ 14 7 3 Selling and Administrative Expenses Variable selling and administrative ($4 per unit sold) Fixed selling and administrative Total 11 $ 35 c. Selling and administrative expenses consist of the following. Year 2 $ 2,304,000 1,680,000 624,000 392,000 $ 232,000 Required: Prepare income statements for each of these two years under variable costing Note: Loss amounts should be entered with a minus sign. Year 1 $ 104,000 200,000 $ 304,000 Year 2 $ 192,000 200,000 $ 392,000

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter7: Variable Costing For Management analysis
Section: Chapter Questions
Problem 9E: The following data were adapted from a recent income statement of Caterpillar Inc. (CAT) for the...
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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 ($48 per unit) Cost of goods sold ($35 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 Year 1 37,000 26,000 Year 2 37,000 48,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $35 per unit product cost using absorption costing consists of the following. Variable overhead Fixed overhead ($407,000/37,000 units) Total product cost per unit Year 1 $ 1,248,000 910,000 338,000 304,000 $ 34,000 Income (Loss) 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 DOWELL Company Income Statements (Variable Costing) $14 7 3 11 $35 Required: Prepare income statements for each of these two years under variable costing. Note: Loss amounts should be entered with a minus sign. Year 1 Year 2 $ 2,304,000 1,680,000 624,000 392,000 $ 232,000 Year 2 Year 1 $ 104,000 200,000 $ 304,000 Year 2 $ 192,000 200,000 $ 392,000
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 ($48 per unit) Cost of goods sold ($35 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 Year 1 37,000 26,000 Year 2 37,000 48,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $35 per unit product cost using absorption costing consists of the following. Variable overhead Fixed overhead ($407,000/37,000 units) Total product cost per unit Year 1 $ 1,248,000 910,000 338,000 304,000 $ 34,000 Income (Loss) 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 DOWELL Company Income Statements (Variable Costing) $14 7 3 11 $35 Required: Prepare income statements for each of these two years under variable costing. Note: Loss amounts should be entered with a minus sign. Year 1 Year 2 $ 2,304,000 1,680,000 624,000 392,000 $ 232,000 Year 2 Year 1 $ 104,000 200,000 $ 304,000 Year 2 $ 192,000 200,000 $ 392,000
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