0 Required information [The fowowing information appies to the questions display

Question

0 Required information [The fowowing information appies to the questions displayed below Dowell Compeny produces a single product. its income statements under absorption costing for its first two years of Part 1 of 2 operation tolow $1.058,000 1 979-000 Additional Information Sales and production data for these first two years folow 23,00 43.00 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 10 Pixed overhead 18320.300/33,000 unite) Tetal produet cost per unit

Explanation / Answer

1) Dowell Company Variable Costing Income Statements Sales (a) $1,058,000.00 $1,978,000.00 Less: Cost of Good Sold Direct materials $138,000.00 $215,000.00 Direct labor $207,000.00 $387,000.00 Variable overhead $138,000.00 $301,000.00 Variable selling and administrative expenses $51,750.00 $96,750.00 Total Variable Cost (b) $534,750.00 $999,750.00 Contribution Margin (a - b) $523,250.00 $978,250.00 Less: Fixed Expenses Fixed selling and administrative expenses $245,000.00 $245,000.00 Fixed Overhead $330,000.00 $330,000.00 Total Fixed Cost $575,000.00 $575,000.00 Net Income/(Loss) (CM - FC) -$51,750.00 $403,250.00 2) Dowell Company Reconciliation of Variable Costing To absorption costing income 2016 2017 Net operating income under variable costing -$51,750 $403,250.00 Fixed Overhead in Ending Inventory (difference) $100,000 Fixed Overhead in beginning Inventory (difference) -$100,000 Net operating income under absorption costing $48,250 $303,250

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