Dowell Company produces a single product. its Income statements under absorption
ID: 2399046 • Letter: D
Question
Dowell Company produces a single product. its Income statements under absorption costing for lts first two years of operation follow Sales ($44 per unlt) Cost of goods sold ($29 per unit Gross margin $ 924,000 S 1804 000 609,000 | | 1,189,000 315,000 515.000 Selling and administrative expenses 282,000 Net Income $ 33.000 s 293,000 Additional Information a. Sales and production data for these first two years tollow. 2014 31,000 31,000 21,000 41,000 015 Unlts produced Units sold b. Varia able cost per unt and total fixed costs yre unchanged during 2014 and 2015. The companys $2s per Direct materials Direct labor Variable overhead Fixed overhead ($310,000/31,000 units) s 5 10 Total product cost per unit S 29 c. Selling and administrative expenses consist of the following 2014 Variable selling and administrative expenses ($2 per unit Fixed selling and administrative expenses 2015 42.000 S 82000 240.000 240,000 Total selling and administrative expenses 5 282,000 S 322,000Explanation / Answer
DOWELL COMPANY
Variable Costing Income Statement
$ 21,000.00
$ 41,000.00
$ 2,014.00
$ 2,015.00
Sales
$ 924,000.00
$ 1,804,000.00
Less: Variable Cost
Direct material
$ 105,000.00
$ 205,000.00
Direct Labor
$ 189,000.00
$ 369,000.00
Variable Overheads
$ 105,000.00
$ 205,000.00
Variable selling and Administrative expenses
$ 42,000.00
$ 82,000.00
Total Variable cost
$ 441,000.00
$ 861,000.00
Contribution Margin
$ 483,000.00
$ 943,000.00
Less: Fixed Cost
Fixed manufacturing Overheads
$ 310,000.00
$ 310,000.00
Fixed Selling and Administrative Expenses
$ 240,000.00
$ 240,000.00
Total Fixed cost
$ 550,000.00
$ 550,000.00
Net Income
$ (67,000.00)
$ 393,000.00
DOWELL COMPANY
Reconciliation of Variable costing and Absorption Costing system
$ 2,014.00
$ 2,015.00
variable Costing Income (loss)
$ (67,000.00)
$ 393,000.00
Add: Closing Inventory in Absorption costing (10*10000)
$ 100,000.00
$ -
Absorption Costing Income
$ 33,000.00
$ 393,000.00
Note
DOWELL COMPANY
Variable Costing Income Statement
$ 21,000.00
$ 41,000.00
$ 2,014.00
$ 2,015.00
Sales
$ 924,000.00
$ 1,804,000.00
Less: Variable Cost
Direct material
$ 105,000.00
$ 205,000.00
Direct Labor
$ 189,000.00
$ 369,000.00
Variable Overheads
$ 105,000.00
$ 205,000.00
Variable selling and Administrative expenses
$ 42,000.00
$ 82,000.00
Total Variable cost
$ 441,000.00
$ 861,000.00
Contribution Margin
$ 483,000.00
$ 943,000.00
Less: Fixed Cost
Fixed manufacturing Overheads
$ 310,000.00
$ 310,000.00
Fixed Selling and Administrative Expenses
$ 240,000.00
$ 240,000.00
Total Fixed cost
$ 550,000.00
$ 550,000.00
Net Income
$ (67,000.00)
$ 393,000.00
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