FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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4 part 2

### Dowell Company Costing Analysis **Introduction:** Dowell Company produces a single product. The table below illustrates its income under variable costing for its first two years of operation. --- **Variable Costing Income:** | | Year 1 | Year 2 | |---|--------|--------| | Income | $50,000 | $680,000 | --- **Additional Information:** a. **Sales and Production Data:** | Units | Year 1 | Year 2 | |---|-------|-------| | Units Produced | 52,000 | 52,000 | | Units Sold | 40,000 | 64,000 | b. **Product Cost Using Absorption Costing:** The company’s $33 per unit product cost (for both years) is detailed as follows: - **Direct Materials:** $6 - **Direct Labor:** $9 - **Variable Overhead:** $8 - **Fixed Overhead:** $10 (calculated based on $500,000/50,000 units) **Total Product Cost Per Unit: $33** --- **Task:** Prepare a statement to convert variable costing income to absorption costing income for both years. *(Note: Leave no cells blank and enter "0" where necessary.)* **Income Conversion Table:** | **Dowell Company** | **Convert Variable Costing Income to Absorption Costing Income** | |---|---|---| | | Year 1 | Year 2 | | **Variable Costing Income** | $50,000 | $680,000 | | **Add: Fixed Overhead in Ending FG Inventory** | 115,440 | 0 | | **Less: Fixed Overhead in Beginning FG Inventory** | 0 | (115,440) | | **Absorption Costing Income** | 165,440 | 564,560 | --- **Note:** The solution must ensure each computational field is completed correctly and that the inventory adjustments reflect the changes in fixed overhead per unit as inventory levels alter.
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Transcribed Image Text:### Dowell Company Costing Analysis **Introduction:** Dowell Company produces a single product. The table below illustrates its income under variable costing for its first two years of operation. --- **Variable Costing Income:** | | Year 1 | Year 2 | |---|--------|--------| | Income | $50,000 | $680,000 | --- **Additional Information:** a. **Sales and Production Data:** | Units | Year 1 | Year 2 | |---|-------|-------| | Units Produced | 52,000 | 52,000 | | Units Sold | 40,000 | 64,000 | b. **Product Cost Using Absorption Costing:** The company’s $33 per unit product cost (for both years) is detailed as follows: - **Direct Materials:** $6 - **Direct Labor:** $9 - **Variable Overhead:** $8 - **Fixed Overhead:** $10 (calculated based on $500,000/50,000 units) **Total Product Cost Per Unit: $33** --- **Task:** Prepare a statement to convert variable costing income to absorption costing income for both years. *(Note: Leave no cells blank and enter "0" where necessary.)* **Income Conversion Table:** | **Dowell Company** | **Convert Variable Costing Income to Absorption Costing Income** | |---|---|---| | | Year 1 | Year 2 | | **Variable Costing Income** | $50,000 | $680,000 | | **Add: Fixed Overhead in Ending FG Inventory** | 115,440 | 0 | | **Less: Fixed Overhead in Beginning FG Inventory** | 0 | (115,440) | | **Absorption Costing Income** | 165,440 | 564,560 | --- **Note:** The solution must ensure each computational field is completed correctly and that the inventory adjustments reflect the changes in fixed overhead per unit as inventory levels alter.
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