Dowell Company produces a single product. Its income statements under absorption

Question

Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow.

Additional Information

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 $29 per unit product cost consists of the following.

Selling and administrative expenses consist of the following.

2016 2017 Sales ($44 per unit) $ 1,056,000 $ 1,936,000 Cost of goods sold ($29 per unit) 696,000 1,276,000 Gross margin 360,000 660,000 Selling and administrative expenses 294,000 339,000 Net income $ 66,000 $ 321,000 DOWELL Company Variable Costing Income Statements 2016 2017 Net income (loss)

Explanation / Answer

Particulars 2016 2017 Sales 1056000 1936000 Less: Variable Production Cost Material at 4 96000 176000 Labor at 8 192000 352000 Variable production overhead at 7 168000 308000 Contribution Margin 600000 1100000 Less: Fixed Manufacturing Overheads 340000 340000 Less: Fixed selling Overheads 240000 240000 Less: variable admin and selling overheads 54000 99000 Net Income -34000 421000

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