Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow. Income Statements (Absorption Costing) Sales ($52 per unit) Cost of goods sold ($36 per unit) Year 2 Year 1 $ 1,508,000 1,044,000 $ 2,756,000 1,908,000 Gross profit Selling and administrative expenses Income Additional Information a. Sales and production data for these first two years follow. Units Units produced Units sold Year 1 41,000 29,000 Year 2 41,000 53,000 464,000 366,000 848,000 462,000 $ 98,000 $ 386,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $36 per unit product cost using absorption costing consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($451,000/41,000 units) Total product cost per unit $ 11 11 3 11 $ 36 c. Selling and administrative expenses consist of the following. Selling and Administrative Expenses Variable selling and administrative ($4 per unit sold) Fixed selling and administrative Total Year 1 $ 116,000 250,000 Year 2 $ 212,000 250,000 $ 366,000 $ 462,000 Required: Prepare Income statements for each of these two years under variable costing. (Loss amounts should be entered with a minus sign.) DOWELL Company Income Statements (Variable Costing) Year 1 $ 1,508,000 $2,750,000 Year 2 Sales Less: Fixed expenses Fixed selling and administrative expenses Sales Plus: Variable expenses 451,000 1 Variable cost of goods sold 250,000 250,000 Fixed selling and administrative expenses 701,000 701,000 Income (Loss) $ 34,000 $ 18,000
Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow. Income Statements (Absorption Costing) Sales ($52 per unit) Cost of goods sold ($36 per unit) Year 2 Year 1 $ 1,508,000 1,044,000 $ 2,756,000 1,908,000 Gross profit Selling and administrative expenses Income Additional Information a. Sales and production data for these first two years follow. Units Units produced Units sold Year 1 41,000 29,000 Year 2 41,000 53,000 464,000 366,000 848,000 462,000 $ 98,000 $ 386,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $36 per unit product cost using absorption costing consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($451,000/41,000 units) Total product cost per unit $ 11 11 3 11 $ 36 c. Selling and administrative expenses consist of the following. Selling and Administrative Expenses Variable selling and administrative ($4 per unit sold) Fixed selling and administrative Total Year 1 $ 116,000 250,000 Year 2 $ 212,000 250,000 $ 366,000 $ 462,000 Required: Prepare Income statements for each of these two years under variable costing. (Loss amounts should be entered with a minus sign.) DOWELL Company Income Statements (Variable Costing) Year 1 $ 1,508,000 $2,750,000 Year 2 Sales Less: Fixed expenses Fixed selling and administrative expenses Sales Plus: Variable expenses 451,000 1 Variable cost of goods sold 250,000 250,000 Fixed selling and administrative expenses 701,000 701,000 Income (Loss) $ 34,000 $ 18,000
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter7: Variable Costing For Management
analysis
Section: Chapter Questions
Problem 9E: The following data were adapted from a recent income statement of Caterpillar Inc. (CAT) for the...
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