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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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