Question

Required information The following information applies to the questions displayed below) Dowell Company produces a single product. Its Income statements under absorption costing for its first two years of operation follow 2018 2019 Sales ($44 per unit) $1,056,000 $1,936.000 Cost of goods sold ($29 per unit 696,000 1,275,000 Gross margin 360,000 660,000 Selling and administrative expenses 299,000 344.000 Net income $ 61,000 $316,000 Additional information a. Sales and production data for these first two years follow Units produced Units sold 2018 2019 34,00 34,000 24,600 44,000 b. Variable cost per unit and total feed costs are unchanged during 2018 and 2010. The companys $29 per unit product cost consists of the following $ 5 9 5 Direct materials Direct labor Variable overhead Fixed overhead ($340,000/34.000 units) Total product cost per unit $29 c Selling and administrative expenses consist of the following Variable selling and administrative expenses ($2.25 per unit) Fixed selling and administrative expenses Total selling and administrative expenses 2010 2019 $ 54,00 $ 99.000 245.000 245,00 $299,000 $344.000 1. Prepare income statements for the company for each of its first two years under variable costing Loss amounts should be entered with a minus sign) DOWELL Company Variable Costing Income Statements 2018 2019 < Prev

Answer 1

1.)	Dowell Company
	Variable Costing Income Statements		Amount $
		2018	2019
	Sales	1,056,000	1,936,000
	Less: Variable Cost
	Direct Materials ( Units sold x Cost per unit )	120,000	220,000
	Direct labor	216,000	396,000
	Variable Overhead	120,000	220,000
	Variable selling & administrative expense	54,000	99,000
	Total Variable Cost	510,000	935,000
	Contribution margin	546,000	1,001,000
	Less: Fixed Costs
	Fixed Overhead	340,000	340,000
	Fixed selling & administrative expense	245,000	245,000
	Total Fixed Costs	585,000	585,000
	Net Income (loss)	-39,000	416,000
	Working
		2018	2019
	Sales	=24000*44	=44000*44
	Less: Variable Cost
	Direct Materials ( Units sold x Cost per unit )	=24000*5	=44000*5
	Direct labor	=24000*9	=44000*9
	Variable Overhead	=24000*5	=44000*5
	Variable selling & administrative expense	=24000*2.25	=44000*2.25
	Total Variable Cost	510,000	935,000
	Contribution margin	546,000	1,001,000
	Less: Fixed Costs
	Fixed Overhead	340,000	340,000
	Fixed selling & administrative expense	245,000	245,000
	Total Fixed Costs	585,000	585,000
	Net Income (loss)	-39,000	416,000