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me statement for the company under variable costing. TREZ Company Income Statement (Variable Costing) Denses T- $4,000,000

me statement for the company under variable costing. TREZ Company Income Statement (Variable Costing) Denses T- $4,000,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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**Trez Company Income Statement Analysis** Trez Company commenced its operations this year. The company produced 100,000 units and sold 80,000 units, as outlined in the absorption costing income statement below. **Income Statement (Absorption Costing)** - **Sales (80,000 units x $50 per unit):** $4,000,000 - **Cost of Goods Sold:** $2,400,000 - **Gross Profit:** $1,600,000 - **Selling and Administrative Expenses:** $560,000 - **Income:** $1,040,000 **Additional Information:** a. Selling and administrative expenses are comprised of $400,000 in annual fixed expenses and $2 per unit in variable expenses. b. The company's product cost of $30 per unit includes: - Direct materials: $3 per unit - Direct labor: $18 per unit - Variable overhead: $3 per unit - Fixed overhead ($600,000 / 100,000 units): $6 per unit **Required Task:** Prepare an income statement for the company using variable costing. **TREZ Company** **Income Statement (Variable Costing)** - **Sales:** $4,000,000 - **Less: Variable expenses** - (Details not provided in the image, require further information to complete) The table for the variable costing income statement is structured but lacks numerical detail. This requires completion based on variable costs and calculations specific to variable costing methodology.
Transcribed Image Text:**Trez Company Income Statement Analysis** Trez Company commenced its operations this year. The company produced 100,000 units and sold 80,000 units, as outlined in the absorption costing income statement below. **Income Statement (Absorption Costing)** - **Sales (80,000 units x $50 per unit):** $4,000,000 - **Cost of Goods Sold:** $2,400,000 - **Gross Profit:** $1,600,000 - **Selling and Administrative Expenses:** $560,000 - **Income:** $1,040,000 **Additional Information:** a. Selling and administrative expenses are comprised of $400,000 in annual fixed expenses and $2 per unit in variable expenses. b. The company's product cost of $30 per unit includes: - Direct materials: $3 per unit - Direct labor: $18 per unit - Variable overhead: $3 per unit - Fixed overhead ($600,000 / 100,000 units): $6 per unit **Required Task:** Prepare an income statement for the company using variable costing. **TREZ Company** **Income Statement (Variable Costing)** - **Sales:** $4,000,000 - **Less: Variable expenses** - (Details not provided in the image, require further information to complete) The table for the variable costing income statement is structured but lacks numerical detail. This requires completion based on variable costs and calculations specific to variable costing methodology.
Expert Solution
Step 1

Income statement under variable costing determines the contribution margin. It subtracts all variable cost from revenue for contribution margin. Fixed cost is then subtracted from contribution margin to arrive at net income or loss

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