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.

2016 2017
Sales ($46 per unit) $ 1,104,000 $ 2,024,000
Cost of goods sold ($31 per unit) 744,000 1,364,000
Gross margin 360,000 660,000
Selling and administrative expenses 287,000 322,000
Net income $ 73,000 $ 338,000

Additional Information

Sales and production data for these first two years follow.
2016 2017
Units produced 34,000 34,000
Units sold 24,000 44,000
Variable cost per unit and total fixed costs are unchanged during 2016 and 2017. The company's $31 per unit product cost consists of the following.
Direct materials $ 6
Direct labor 8
Variable overhead 7
Fixed overhead ($340,000/34,000 units) 10
Total product cost per unit $ 31
Selling and administrative expenses consist of the following.
2016 2017
Variable selling and administrative expenses ($1.75 per unit) $ 42,000 $ 77,000
Fixed selling and administrative expenses 245,000 245,000
Total selling and administrative expenses $ 287,000 $ 322,000
DOWELL Company
Variable Costing Income Statements
2016 2017
Net income (loss)