k 4 Trez Company began operations this year. During this first year, the company

Question

k 4 Trez Company began operations this year. During this first year, the company produced 100,000 unts and sold 80000 units. The absorption costing income statement for this year follows. Sales (80,000 units $40 per unit $3,200, 000 Beginning inventory Cost of goods manufactured (100,000 units $20 per unit) Cost of good available for sale Ending inventory (20, oo0 $20) Cost of goods sold 2, 000,000 2,000,000 400,000 1, 600, 000 1, 600, 000 560,000 $1,040, 000 Gross margin Net income Additional Information o. Selling and administrative expenses consist of $400,000 in annual fixed expenses and $2 per unit in variable selling and administrative expenses b. The company's product cost of $20 per unit is computed as follows. Direct materials Direct labor Variable overhead Fixed overhead ($8o0, 000/100, 000 units) $5 per unit $3 per unit $4 per unit $8 per unit Required:

Explanation / Answer

TREZ Company Variable Costing Income Statement Sales $3,200,000 Less: Variable costs Direct materials (80000 x $5)        400,000 Direct labor (80000 x $3)        240,000 Variable overhead (80000 x 4)        320,000 Variable selling and administrative expenses (80000 x $2)        160,000 Total Variable expenses 1,120,000 Contribution margin 2,080,000 Less: Fixed expenses Fixed overhead $800,000 Fixed selling and administrative costs        400,000 Total Fixed expenses $1,200,000 Net income (loss) $880,000 Net Income Variable costing $880,000 Add: $8 per unit Fixed OH transferred in ending inventory(8 x 20000) 160000 Absorption costing $1,040,000

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