Trez Company began operations this year. During this year, the company produced 100,000 units and...
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Accounting
Trez Company began operations this year. During this year, the company produced 100,000 units and sold 80,000 units. The absorption costing income statement for this year follows.
Income Statement (Absorption Costing)
Sales (80,000 units $45 per unit)
$ 3,600,000
Cost of goods sold
2,000,000
Gross profit
1,600,000
Selling and administrative expenses
560,000
Income
$ 1,040,000
Additional Information
Selling and administrative expenses consist of $400,000 in annual fixed expenses and $2 per unit in variable selling and administrative expenses.
The company's product cost of $25 per unit consists of the following.
Direct materials
$ 3
per unit
Direct labor
$ 13
per unit
Variable overhead
$ 3
per unit
Fixed overhead ($600,000 / 100,000 units)
$ 6
per unit
Required: Prepare an income statement for the company under variable costing.
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