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I am puzzled, any help is appreciated! I have to complete an income statements for the company for each of its first two years under variable costing.
Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow.
| | | 2016 | | | 2017 | |
| Sales ($44 per unit) | $ | 1,012,000 | | $ | 1,892,000 | |
| Cost of goods sold ($29 per unit) | | 667,000 | | | 1,247,000 | |
| Gross margin | | 345,000 | | | 645,000 | |
| Selling and administrative expenses | | 286,000 | | | 326,000 | |
| Net income | $ | 59,000 | | $ | 319,000 | |
| |
Additional Information
Sales and production data for these first two years follow.
| | 2016 | | 2017 | |
| Units produced | 33,000 | | 33,000 | |
| Units sold | 23,000 | | 43,000 | |
| | |
Variable cost per unit and total fixed costs are unchanged during 2016 and 2017. The company's $29 per unit product cost consists of the following.
| | |
| Direct materials | $ | 4 | |
| Direct labor | | 9 | |
| Variable overhead | | 6 | |
| Fixed overhead ($330,000/33,000 units) | | 10 | |
| Total product cost per unit | $ | 29 | |
| |
Selling and administrative expenses consist of the following.
| | | 2016 | | | 2017 | |
| Variable selling and administrative expenses ($2 per unit) | $ | 46,000 | | $ | 86,000 | |
| Fixed selling and administrative expenses | | 240,000 | | | 240,000 | |
| Total selling and administrative expenses | $ | 286,000 | | $ | 326,000 | |
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