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Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow.
|Sales ($46 per unit)||$||1,150,000||$||2,070,000|
|Cost of goods sold ($31 per unit)||775,000||1,395,000|
|Selling and administrative expenses||301,250||346,250|
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 ($350,000/35,000 units)||10|
|Total product cost per unit||$||31|
Selling and administrative expenses consist of the following.
|Variable selling and administrative expenses ($2.25 per unit)||$||56,250||$||101,250|
|Fixed selling and administrative expenses||245,000||245,000|
|Total selling and administrative expenses||$||301,250||$||346,250|
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.)
|Variable costing Income Statements|
|Less: Variable costs|
|Variable selling and administrative expenses||56250||101250|
|Total variable costs||581250||1046250|
|Less: Fixed expenses|
|Fixed selling and administrative expenses||245000||245000|
|Total Fixed expenses||595000||595000|
|Net income (loss)||-26250||428750|
|For variable costs, multiply Direct materials , Direct labor , Variable overhead cost per unit by 25000 in 2016 and 45000 in 2017|
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