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Category > Accounting Posted 12 Aug 2017 My Price 11.00

absorption costing income

1) Complete income statements for the company for each of its first two years under variable costing.

2) What are the differences between the absorption costing income and the variable costing income for these two years?

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

    2012   2013
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   300,000   350,000
 
Net income $ 60,000 $ 310,000
 
Additional Information
a. Sales and production data for these first two years follow.
  2012 2013
Units produced 34,000 34,000
Units sold 24,000 44,000
b.

Variable cost per unit and total fixed costs are unchanged during 2012 and 2013. The company's $29 per unit product cost consists of the following.
 
Direct materials $ 4
Direct labor   8
Variable overhead   7
Fixed overhead ($340,000/34,000 units)   10
 
Total product cost per unit $ 29
 
c. Selling and administrative expenses consist of the following.
    2012   2013
Variable selling and administrative ($2.5 per unit) $ 60,000 $ 110,000
Fixed selling and administrative   240,000   240,000
 
Total selling and administrative $ 300,000 $

350,000
 

 

Answers

Maurice Tutor
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Status NEW Posted 12 Aug 2017 01:08 PM My Price 11.00

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