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 × $40 per unit) | $ | 3,200,000 | |||||
Cost of goods sold | |||||||
Beginning inventory | $ | 0 | |||||
Cost of goods manufactured (100,000 units × $20 per unit) | 2,000,000 | ||||||
Cost of good available for sale | 2,000,000 | ||||||
Ending inventory (20,000 × $20) | 400,000 | ||||||
Cost of goods sold | 1,600,000 | ||||||
Gross margin | 1,600,000 | ||||||
Selling and administrative expenses | 510,000 | ||||||
Net income | $ | 1,090,000 | |||||
Additional Information
Direct materials | $ | 4 | per unit | ||
Direct labor | $ | 5 | per unit | ||
Variable overhead | $ | 3 | per unit | ||
Fixed overhead ($800,000 / 100,000 units) | $ | 8 | per unit | ||
Required:
1. Prepare an income statement for the company
under variable costing.
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