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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 Sales ($59 per unit) 1,652,000 4,012,000 Cost of goods sold ($43 per unit) 1,204,000 2,924,000 Gross profit 448,000 1,088,000 Selling and administrative 314,000 434,000 expenses Income $134,000 $654,000 Additional Information a. Sales and production data for these first two years follow. Units Year 1 Year 2 Units 48,000 48,000 produced Units sold 28,000 68,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $43 per unit product cost using absorption costing consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($480,000/48,000 units) Total product cost per unit $ 11 18 4 10 $ 43 c. Selling and administrative expenses consist of the following. Year 2 Selling and Administrative Expenses Variable selling and administrative ($3 per unit sold). Fixed selling and administrative Total Year 1 Year 2 $ 84,000 $ 204,000 230,000 230,000 $314,000 $434,000 Required: Prepare income statements for each of these two years under variable costing. (Loss amounts should be entered with a minus sign.)

Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow. Income Statements (Absorption Costing) Year 1 Sales ($59 per unit) 1,652,000 4,012,000 Cost of goods sold ($43 per unit) 1,204,000 2,924,000 Gross profit 448,000 1,088,000 Selling and administrative 314,000 434,000 expenses Income $134,000 $654,000 Additional Information a. Sales and production data for these first two years follow. Units Year 1 Year 2 Units 48,000 48,000 produced Units sold 28,000 68,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $43 per unit product cost using absorption costing consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($480,000/48,000 units) Total product cost per unit $ 11 18 4 10 $ 43 c. Selling and administrative expenses consist of the following. Year 2 Selling and Administrative Expenses Variable selling and administrative ($3 per unit sold). Fixed selling and administrative Total Year 1 Year 2 $ 84,000 $ 204,000 230,000 230,000 $314,000 $434,000 Required: Prepare income statements for each of these two years under variable costing. (Loss amounts should be entered with a minus sign.)

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
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) Additional Information a. Sales and production data for these first two years follow. Units Units produced Units sold 28,000 Year 1 Year 2 48,000 48,000 68,000 Sales ($59 per unit) 1,652,000 4,012,000 Cost of goods sold ($43 per unit) 1,204,000 2,924,000 Gross profit 448,000 1,088,000 Selling and administrative 314,000 434,000 expenses Income $ 134,000 $ 654,000 Year 1 Direct materials Direct labor Variable overhead Fixed overhead ($480,000/48,000 units) Total product cost per unit b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $43 per unit product cost using absorption costing consists of the following. $ $ 11 18 4 10 $ 43 c. Selling and administrative expenses consist of the following. Sales Less: Variable expenses Variable cost of goods sold Fixed overhead Year 2 Selling and Administrative Expenses Variable selling and administrative ($3 per unit sold) Fixed selling and administrative Total $ Year 1 Year 2 $ 84,000 $ 204,000 230,000 230,000 $314,000 $434,000 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 Year 2 $ $ 1,652,000 4,012,000
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) Additional Information a. Sales and production data for these first two years follow. Units Units produced Units sold 28,000 Year 1 Year 2 48,000 48,000 68,000 Sales ($59 per unit) 1,652,000 4,012,000 Cost of goods sold ($43 per unit) 1,204,000 2,924,000 Gross profit 448,000 1,088,000 Selling and administrative 314,000 434,000 expenses Income $ 134,000 $ 654,000 Year 1 Direct materials Direct labor Variable overhead Fixed overhead ($480,000/48,000 units) Total product cost per unit b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $43 per unit product cost using absorption costing consists of the following. $ $ 11 18 4 10 $ 43 c. Selling and administrative expenses consist of the following. Sales Less: Variable expenses Variable cost of goods sold Fixed overhead Year 2 Selling and Administrative Expenses Variable selling and administrative ($3 per unit sold) Fixed selling and administrative Total $ Year 1 Year 2 $ 84,000 $ 204,000 230,000 230,000 $314,000 $434,000 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 Year 2 $ $ 1,652,000 4,012,000
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