Question

Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow. 2016 2017 Sales ($48 per unit) $ 960,000 $ 1,920,000 Cost of goods sold ($33 per unit) 660,000 1,320,000 Gross margin 300,000 600,000 Selling and administrative expenses 280,000 320,000 Net income $ 20,000 $ 280,000 Additional Information Sales and production data for these first two years follow. 2016 2017 Units produced 30,000 30,000 Units sold 20,000 40,000 Variable cost per unit and total fixed costs are unchanged during 2016 and 2017. The company's $33 per unit product cost consists of the following. Direct materials $ 6 Direct labor 9 Variable overhead 8 Fixed overhead ($300,000/30,000 units) 10 Total product cost per unit $ 33 Selling and administrative expenses consist of the following. 2016 2017 Variable selling and administrative expenses ($2 per unit) $ 40,000 $ 80,000 Fixed selling and administrative expenses 240,000 240,000 Total selling and administrative expenses $ 280,000 $ 320,000 1. Complete income statements for the company for each of its first two years under variable costing. (Loss amounts should be entered with a minus sign.)

Answer 1