Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow.
|Sales ($46 per unit)||$||1,104,000||$||2,024,000|
|Cost of goods sold ($31 per unit)||744,000||1,364,000|
|Selling and administrative expenses||287,000||322,000|
Sales and production data for these first two years follow.
Variable cost per unit and total fixed costs are unchanged during 2016 and 2017. The company's $31 per unit product cost consists of the following.
|Fixed overhead ($340,000/34,000 units)||10|
|Total product cost per unit||$||31|
Selling and administrative expenses consist of the following.
|Variable selling and administrative expenses ($1.75 per unit)||$||42,000||$||77,000|
|Fixed selling and administrative expenses||245,000||245,000|
|Total selling and administrative expenses||$||287,000||$||322,000|
1. Complete income statements for the company for each of its first two years under variable costing.
Variable costing income statement
For the both years 2016 and 2017
|Variable cost of goods sold||504,000||924,000|
|Variable selling expenses||42,000||77,000|
|Net operating income||$(27,000)||$438,000|
Reconciliation of variable costing and absorption casting incomes
|Variable costing net operating income||$(27,000)||$438,000|
|Fixed mfg OH cost differed in( or released from )inventory||$100,000||$(100,000)|
|Absorption costing net operating income||$73,000||$338,000|
Note : unit product cost under variable costing = unit product cost under absorption casting - fixed overhead cost per unit
:,Here negative values are quoted on brackets or parentheses
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