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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 2 Sales ($57 per unit) Cost of goods sold ($46 per unit) Gross profit $ 3,420,000 2,760,000 660,000 300,000 Selling and administrative expenses Income $360,000 Additional Information a. Sales and production data for these first two years follow. Units Units produced Units sold Direct materials Direct labor Variable overhead 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. 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 Income (Loss) c. Selling and administrative expenses consist of the following. $ 16 16 6 8 $ 46 Selling and Administrative Expenses Variable selling and administrative ($2 per unit sold) Fixed selling and administrative Total 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.) Year 1 Year 1 $ 64,000 180,000 $ 244,000 Year 2 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) Gross profit $ 3,420,000 2,760,000 660,000 300,000 Selling and administrative expenses Income $360,000 Additional Information a. Sales and production data for these first two years follow. Units Units produced Units sold Direct materials Direct labor Variable overhead 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. 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 Income (Loss) c. Selling and administrative expenses consist of the following. $ 16 16 6 8 $ 46 Selling and Administrative Expenses Variable selling and administrative ($2 per unit sold) Fixed selling and administrative Total 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.) Year 1 Year 1 $ 64,000 180,000 $ 244,000 Year 2 Year 2 $ 120,000 180,000 $ 300,000

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) Year 2 Sales ($57 per unit) Cost of goods sold ($46 per unit) Gross profit $ 3,420,000 2,760,000 660,000 300,000 Selling and administrative expenses Income $360,000 Additional Information a. Sales and production data for these first two years follow. Units Units produced Units sold Direct materials Direct labor Variable overhead 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. 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 Income (Loss) c. Selling and administrative expenses consist of the following. $ 16 16 6 8 $ 46 Selling and Administrative Expenses Variable selling and administrative ($2 per unit sold) Fixed selling and administrative Total 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.) Year 1 Year 1 $ 64,000 180,000 $ 244,000 Year 2 Year 2 $ 120,000 180,000 $ 300,000
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) Year 2 Sales ($57 per unit) Cost of goods sold ($46 per unit) Gross profit $ 3,420,000 2,760,000 660,000 300,000 Selling and administrative expenses Income $360,000 Additional Information a. Sales and production data for these first two years follow. Units Units produced Units sold Direct materials Direct labor Variable overhead 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. 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 Income (Loss) c. Selling and administrative expenses consist of the following. $ 16 16 6 8 $ 46 Selling and Administrative Expenses Variable selling and administrative ($2 per unit sold) Fixed selling and administrative Total 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.) Year 1 Year 1 $ 64,000 180,000 $ 244,000 Year 2 Year 2 $ 120,000 180,000 $ 300,000
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