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
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
Chapter6: Activity-based, Variable, And Absorption Costing
Section: Chapter Questions
Problem 15EA: Using this information from Planters. Inc., what is the cost per unit under both variable and...
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Question
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 | $ 4 | per unit |
---|---|---|
Direct labor | $ 10 | per unit |
Variable overhead | $ 4 | per unit |
Fixed overhead ($700,000 / 100,000 units) | $ 7 | per unit |
Required:
Prepare an income statement for the company under variable costing.
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