Required information Problem 19-1A Variable costing income statement and conversion to absorption costing income (two consecutive years) LO P2, P3 [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. Sales ($48 per unit) Cost of goods sold ($33 per unit) Gross margin Selling and administrative expenses Net income 2018 2019 $1,152,000 $2,112,000 792,000 1,452,000 360,000 660,000 299,000 344,000 $ 61,000 $ 316,000 Additional Information a. Sales and production data for these first two years follow. Units produced Units sold 2018 34,000 24,000 2019 34,000 44,000 b. Variable cost per unit and total fixed costs are unchanged during 2018 and 2019. The company's $33 per unit product cost consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($340,000/34,000 units) Total product cost per unit $ 5 8 10 10 $33 C. Selling and administrative expenses consist of the following. Variable selling and administrative expenses ($2.25 per unit) Fixed selling and administrative expenses Total selling and administrative expenses 2018 2019 $ 54,000 $ 99,000 245,000 245,000 $299,000 $344,000 Problem 19-1A Part 1 1. Prepare income statements for the company for each of its first two years under variable costing. (Loss amounts should be entered with a minus sign.) DOWELL Company Variable Costing Income Statements 2018 $ 1,152,000 2019 Sales $ 2,112,000 Less: Variable costs 264,000 Direct materials Direct labor Variable overhead Variable selling and administrative expenses 144,000 216,000 240,000 396,000 440,000 600,000 1,100,000 Total variable costs Contribution margin Less: Fixed expenses Fixed selling and administrative costs Fixed overhead Net income (loss) 2. Prepare a table as in Exhibit 19.12 to convert variable costing income to absorption costing income for both 2018 and 2019. (Loss amounts should be entered with a minus sign.) DOWELL COMPANY Reconciliation of Variable Costing Income to Absorption Costing Income 2018 Variable costing income (loss) 2019 Absorption costing income (loss)