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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

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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 good available for sale Ending inventory (20,000 $25) Cost of goods sold Gross margin Selling and administrative expenses Net income $ 0 2,500,000 2,500,000 500,000 2,000,000 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 $25 per unit is computed as follows. Direct materials Direct labor Variable overhead Fixed overhead ($600,000 / 100,000 units) $ 3 per unit $12 per unit $ 4 per unit $6 per unit Required: 1. Prepare an income statement for the company under variable costing. TREZ Company Variable Costing Income Statement Net income (loss)

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