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

Additional Information

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

b. Variable cost per unit and total fixed costs are unchanged during 2018 and 2019. The company?s $31 per unit product cost consists of the following.

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

c. Selling and administrative expenses consist of the following.

Required

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

2. Prepare a table as in Exhibit 6.12 to convert variable costing income to absorption costing income for both 2018 and 2019.

2018 2019 Sales ($46 per unit). . Cost of goods sold ($31 per unit) Gross margin Selling and administrative expenses $920,000 $1,840,000 620,000 300,000 290,000 1,240,000 340,000 $ 260,000 Net income.. $ 10,000 2018 2019 Units produced. Units sold. 30,000 20,000 30,000 40,000