Problem 19-2A Variable costing income statement and conversion to absorption costing income LO P2, P3 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. $3,600,000 Sales (80,000 units * $ 45 per unit) Cost of goods sold Beginning inventory Cost of goods manufactured (100,000 units X $25 per unit) Cost of goods available for sale Ending inventory (20,000 X $25) Cost of goods sold Gross margin Selling and administrative expenses Net income 2,500,000 2,500,000 500,000 2,000,000 1,600,000 530,000 $1,070,000 Additional Information a. Selling and administrative expenses consist of $350,000 in annual fixed expenses and $2.25 per unit in variable selling and administrative expenses. b. The company's product cost of $25 per unit is computed as follows. Direct materials Direct labor Variable overhead Fixed overhead ($800,000 / 100,000 units) $ 3 per unit $10 per unit $ 4 per unit $ 8 per unit Required: 1. Prepare an income statement for the company under variable costing. 2. Fill in the blanks. Required 1 Required 2 Prepare an income statement for the company under variable costing. TREZ Company Variable Costing Income Statement $ 3,600,000 Sales Less: Variable costs Direct materials Direct labor Variable overhead 300,000 1,000,000 400,000 180,000 Variable selling and administrative expenses Total variable costs 1,880,000 Net income (loss) Required 1 Required 2 > Required 1 Required 2 Fill in the blanks. The dollar difference in variable costing income and absorption costing income = units x fixed overhead per unit.