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 | 490,000 |
| Income | $ 1,110,000 |
Additional Information
- Selling and administrative expenses consist of $350,000 in annual fixed expenses and $1.75 per unit in variable selling and administrative expenses.
- The company's product cost of $25 per unit consists of the following.
| Direct materials | $ 4 | per unit |
|---|---|---|
| Direct labor | $ 9 | per unit |
| Variable overhead | $ 4 | per unit |
| Fixed overhead ($800,000 / 100,000 units) | $ 8 | per unit |
Required: Prepare an income statement for the company under variable costing.
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