70.2K

Verified Solution

Link Copied!

(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. Sales ($48 per unit) Cost of goods sold ($33 per unit) Gross margin Selling and administrative expenses Net income 2018 2019 $1,104,000 $2,064,000 759,000 1,419,000 345,000 645,000 297,500 347,500 $ 47,500 $ 297,500 Additional Information a. Sales and production data for these first two years follow. Units produced Units sold 2018 33,000 23,000 2019 33,000 43,000 b. Variable cost per unit and total fixed costs are unchanged during 2018 and 2019. The company's $33 per unit product cost consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($330,000/33,000 units) Total product cost per unit $ 4 9 10 10 $33 c. Selling and administrative expenses consist of the following. Variable selling and administrative expenses ($2.5 per unit) Fixed selling and administrative expenses Total selling and administrative expenses 2018 2019 $ 57,500 $107,500 240,000 240,000 $297,500 $347,500 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 Sales Less: Variable costs Direct materials Direct labor Variable overhead Variable selling and administrative expenses Contribution margin Less: Fixed expenses Fixed overhead Fixed selling and administrative costs Net income (loss) 2. Prepare a table as in Exhibit 6.12 to convert variable costing income to absorption costing income for both 2018 and 2019. (Loss amounts should be entered with a minus sign.) DOWELL COMPANY Reconciliation of Variable Costing Income to Absorption Costing Income 2018 Variable costing income (loss) 2019 Absorption costing income (loss)

Answer & Explanation Solved by verified expert

See Answer