Question
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
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. Sales (80,000 units x $45 per unit) $3,600,000 Cost of goods sold Beginning inventory Cost of goods manufactured (100,000 units $25 per unit) 2,500,000 Cost of goods available for sale 2,500,000 Ending inventory (20,000 x $25) Cost of goods sold Gross margin Selling and administrative expenses Net income 500,000 2,000,000 1,600,000 580,000) $1,020,000 Additional Information a. Selling and administrative expenses consist of $400,000 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 $3 per unit $13 per unit $3 per unit Fixed overhead ($600,000 100,000 units) $ 6 per unit Required: 1. Prepare an income statement for the company under variable costing. 2. Fill in the blanks. 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. Sales (80,000 units x $45 per unit) $3,600,000 Cost of goods sold Beginning inventory Cost of goods manufactured (100,000 units $25 per unit) 2,500,000 Cost of goods available for sale 2,500,000 Ending inventory (20,000 x $25) Cost of goods sold Gross margin Selling and administrative expenses Net income 500,000 2,000,000 1,600,000 580,000) $1,020,000 Additional Information a. Selling and administrative expenses consist of $400,000 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 $3 per unit $13 per unit $3 per unit Fixed overhead ($600,000 100,000 units) $ 6 per unit Required: 1. Prepare an income statement for the company under variable costing. 2. Fill in the blanks.
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