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ID: 2340616 • Letter: R
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Required information [The following information applies to the questions displayed below.] Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow 2016 2017 Sales ($48 per unit) Cost of goods sold ($33 per unit) Gross margin Selling and administrative expenses Net income $1,152,000 $2,112,000 792,0001,452, 000 660,000 339,000 $ 66,000 321,000 360,000 294,000 Additional Information a. Sales and production data for these first two years follow 2016 34,000 34,000 24,000 44,000 2017 Units produced Units soldExplanation / Answer
Dowell Company Variable Costing Income Statement 2016 ($) 2017 ($) Sales (A) 11,52,000 21,12,000 Less: variable cost Direct Materials 1,20,000 2,20,000 Direct Labor 1,92,000 3,52,000 Variable Overhead 2,40,000 4,40,000 Variable Selling & Administrative Expensses 54,000 99,000 Total Variable Cost (B) 6,06,000 11,11,000 Contribution Margin © (A-B) 5,46,000 10,01,000 Less: Fixed Expenses Fixed Overhead 3,40,000 3,40,000 Fixed Selling & Administrative Expense 2,40,000 2,40,000 Total Fixed Expenses (D) 5,80,000 5,80,000 Net Income (Loss) (C-D) (34,000) 4,21,000 Notes: 1. Please note that under variable costing Varaible cost is calculated on the basis of no of goods sold and not on the basis of no of goods produced. So, variable cost is calculated as below: 2016 ($) 2017 ($) Direct Materials 1,20,000 2,20,000 (24000*5) (44000*5) Direct Labor 1,92,000 3,52,000 (24000*8) (44000*8) Variable Overhead 2,40,000 4,40,000 (24000*10) (44000*10) Total 5,52,000 10,12,000
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