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

		2014		2015
Sales ($48 per unit)	$	1,008,000	$	1,968,000
Cost of goods sold ($33 per unit)		693,000		1,353,000
Gross margin		315,000		615,000
Selling and administrative expenses		292,250		337,250
Net income	$	22,750	$	277,750

Additional Information
a.	Sales and production data for these first two years follow.

	2014	2015
Units produced	31,000	31,000
Units sold	21,000	41,000

b.	Variable cost per unit and total fixed costs are unchanged during 2014 and 2015. The company's $33 per unit product cost consists of the following.

Direct materials	$	5
Direct labor		8
Variable overhead		10
Fixed overhead ($310,000/31,000 units)		10
Total product cost per unit	$	33

c.	Selling and administrative expenses consist of the following.

		2014		2015
Variable selling and administrative expenses ($2.25 per unit)	$	47,250	$	92,250
Fixed selling and administrative expenses		245,000		245,000
Total selling and administrative expenses	$	292,250	$	337,250

9.

value: 10.00 points

Required information

1.	Complete income statements for the company for each of its first two years under variable costing. (Loss amounts should be entered with a minus sign.)

10.

value: 10.00 points

Required information

2.	What are the differences between the absorption costing income and the variable costing income for these two years? (Loss amounts should be entered with a minus sign.)

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