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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 ($46 per unit)	$	920,000	$	1,840,000
Cost of goods sold ($31 per unit)		620,000		1,240,000
Gross margin		300,000		600,000
Selling and administrative expenses		290,000		340,000
Net income	$	10,000	$	260,000

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

	2014	2015
Units produced	30,000	30,000
Units sold	20,000	40,000

b.	Variable cost per unit and total fixed costs are unchanged during 2014 and 2015. The company's $31 per unit product cost consists of the following.

Direct materials	$	5
Direct labor		9
Variable overhead		7
Fixed overhead ($300,000/30,000 units)		10
Total product cost per unit	$	31

c.	Selling and administrative expenses consist of the following.

		2014		2015
Variable selling and administrative expenses ($2.50 per unit)	$	50,000	$	100,000
Fixed selling and administrative expenses		240,000		240,000
Total selling and administrative expenses	$	290,000	$	340,000

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.) 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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