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

Question

Trez Company began operations this year. During this first year, the company produced 100,000 units and sold 80,000 units. The absorption costing income statement for this year follows.

  
Additional Information

Selling and administrative expenses consist of $400,000 in annual fixed expenses and $1.75 per unit in variable selling and administrative expenses.

The company's product cost of $30 per unit is computed as follows.

Required:
1. Prepare an income statement for the company under variable costing.

Sales (80,000 units × $50 per unit) $ 4,000,000 Cost of goods sold Beginning inventory $ 0 Cost of goods manufactured (100,000 units × $30 per unit) 3,000,000 Cost of good available for sale 3,000,000 Ending inventory (20,000 × $30) 600,000 Cost of goods sold 2,400,000 Gross margin 1,600,000 Selling and administrative expenses 540,000 Net income $ 1,060,000

Explanation / Answer

Answer

trez company product 100000 units and sold 80000 units

trez company

variable costing income statement

particulars amount sales ( 80000 * 50 ) 4000000 less; variable cost of goods sold 80000 * ( 4 + 15 + 3 ) 1760000 gross contribution margin 2240000 less; variable marketing and admin ( 80000 * 1.75 ) 140000 contribution margin 2100000 less; fixed expenses fixed overhead 800000 selling and admin exp 400000 1200000 net operating income 900000

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