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 x $40 per unit) Cost of goods sold Gross profit Selling and administrative expenses Income $ 3,200,000 1,600,000 1,600,000 560,000 $ 1,040,000 Additional Information a. Selling and administrative expenses consist of $400,000 in annual fixed expenses and $2 per unit in variable selling and administrative expenses. b. The company's product cost of $20 per unit consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($700,000/ 100,000 units) $5 per unit $5 per unit $3 per unit $7 per unit Required: Prepare an income statement for the company under variable costing.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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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 x $40 per unit)
Cost of goods sold
Gross profit
Selling and administrative expenses
Income
Additional Information
a. Selling and administrative expenses consist of $400,000 in annual fixed expenses and $2 per unit in variable selling and
administrative expenses.
b. The company's product cost of $20 per unit consists of the following.
Direct materials
Direct labor
Variable overhead
Fixed overhead ($700,000 / 100,000 units)
Required:
Prepare an income statement for the company under variable costing.
Sales
Less: Variable expenses
Variable selling and administrative expenses
Variable cost of goods sold
Contribution margin
Less: Fixed expenses
TREZ Company
Income Statement (Variable Costing)
$ 3,200,000
1,600,000
1,600,000
560,000
$ 1,040,000
Fixed overhead
Fixed selling and administrative costs
Income
$5 per unit
$5 per unit
$ 3 per unit
$ 7 per unit
Transcribed Image Text: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 x $40 per unit) Cost of goods sold Gross profit Selling and administrative expenses Income Additional Information a. Selling and administrative expenses consist of $400,000 in annual fixed expenses and $2 per unit in variable selling and administrative expenses. b. The company's product cost of $20 per unit consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($700,000 / 100,000 units) Required: Prepare an income statement for the company under variable costing. Sales Less: Variable expenses Variable selling and administrative expenses Variable cost of goods sold Contribution margin Less: Fixed expenses TREZ Company Income Statement (Variable Costing) $ 3,200,000 1,600,000 1,600,000 560,000 $ 1,040,000 Fixed overhead Fixed selling and administrative costs Income $5 per unit $5 per unit $ 3 per unit $ 7 per unit
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