Required information [The following information applies to the questions display

Question

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 ($46 per unit) Cost of goods sold ($31 per unit) Gross margin Selling and administrative expenses Net income $1,150,000 $2,070,000 775,000 1,395,000 375,000 301,250 675,000 346,250 $ 73,750 328,750 Additional Information a. Sales and production data for these first two years follow 2016 2017 Units produced Units sold 25,000 45,000 35,000 35,000 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 ($35,000/35,000 10 units) Total product cost per unit $31 c. Selling and administrative expenses consist of the following 2016 2017 Variable selling and administrative expenses ($2.25 per unit) Fixed selling and administrative expenses Total selling and administrative expenses $ 56,250 $101,250 245,000 245,000 $301,250 $346,250

Explanation / Answer

Dowell Compant Variable Costing Income Statement 2016 2017 A sales 1150000 2070000 B Variable cost of goods sold 735000 735000 C Variable Selling expenses 56250 101250 D=A-(B+C) Contribution 358750 1233750 E Fixed Manufacturing expenses 350000 350000 F Fixed Selling Expenses 245000 245000 G= D-(E+F) Net income -236250 638750

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