Question

PLEASE fill out chart given!!!!

Trez Company began operations this year. During this first year, the company produced 100,000 units and sold 80,000 units. The absorption costing income statement for this year follows.

Sales (80,000 units × $45 per unit)				$	3,600,000
Cost of goods sold
Beginning inventory	$	0
Cost of goods manufactured (100,000 units × $25 per unit)		2,500,000
Cost of good available for sale		2,500,000
Ending inventory (20,000 × $25)		500,000
Cost of goods sold					2,000,000
Gross margin					1,600,000
Selling and administrative expenses					610,000
Net income				$	990,000

  
Additional Information

Selling and administrative expenses consist of $450,000 in annual fixed expenses and $2 per unit in variable selling and administrative expenses.

The company's product cost of $25 per unit is computed as follows.

Direct materials	$	4		per unit
Direct labor	$	11		per unit
Variable overhead	$	3		per unit
Fixed overhead ($700,000 / 100,000 units)	$	7		per unit

Required:
1. Prepare an income statement for the company under variable costing.

TREZ Company
Variable Costing Income Statement
total fixed expenses
Net income (loss)

Answer 1

Income Statement for TREZ company under Variable Costing Method

	Particulars		Amount (in $)
[A]	Revenues		3,600.000
	Sales (80,000 units * $ 45 PU)	3,600,000
[B]	Variable Production Expenses		1,440,000
	Direct Material ($4*80000)	320,000
	Direct Labour ($11*80000)	880,000
	Variable Overhead ($3*80000)	240,000
[C]	Variable Selling and Admn Exps ($2*80000)		160,000
[D] = [B+C]	Total Variable Costing		1600000
[E] = [A-D]	Contribution Margin		2000000
[F]	Fixed Production Expenses	700,000
[G]	Fixed Selling and Admn Exps	450,000
[H] = F +G	Total Fixed Costs		1150000
[I] = E-H	Net Income		850,000