Dowell Company produces a single product. Its income statements under absorption
ID: 2527540 • Letter: D
Question
Dowell Company produces a single product. Its income statements under absorption costing for its first two y operation follow. ears of 2016 2017 Sales ($46 per unit) Cost of goods sold ($31 per unit) Gross margin Selling and administrative expenses Net income $1, 012, 000 $1,932,000 682,000 1,302,000 630, ??? 329, ??? S 41, 00 S 301, 000 330, e00 289, ??? Additional Information a. Sales and production data for these first two years follow. 2016 32,000 32,000 22,00? 42,000 2017 Units produced Units sold b. 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. Direct materials Direct labor Variable overhead Fixed overhead ($320, 000/32, 000 units) Total product cost per unit s 5 $31 Pre atNxT> 6 of 7NextExplanation / Answer
RECONCILIATION OF VARIABLE COSTING INCOME TO ABSORPTION COSTING INCOME 2016 2017 Variable Costing income and losses $ -59,000 $ 4,01,000 Add: Fixed overhaed on closing stock (10,000 X $ 10) $ 1,00,000 0 Less: Fixed overhaed on closing stock (10,000 X $ 10) $ - -100000 Net Income as per Abosrption Costing $ 41,000 $ 3,01,000 CACLULATION OF THE INCOME AS PER VARIABLE COSTING METHOD 2016 2017 Sales 10,12,000.00 $ 19,32,000 Less: Cost of Goods Sold ($ 31 - $ 10) 4,62,000.00 8,82,000.00 (22,000 X $ 21) (42,000 X $ 21) Less: Variable costing of Selling and administrative Exp. 44,000.00 84,000.00 (22,000 X $ 2) (42,000 X $ 2) Gross Revenue : $ 5,06,000 $ 9,66,000 Less: Fixed Expenses Fixed overhead $ 3,20,000 $ 3,20,000 Fixed Selling and administrative expenses $ 2,45,000.00 $ 2,45,000.00 Net Revenue -59,000.00 4,01,000.00
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