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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
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) Cost of goods sold Beginning inventory Cost of goods manufactured (100,000 units x Cost of qood available for sale $3,600,000 0 $25 per unit) 2,500,000 2,500,000 500,000 x $25) Ending inventory (20,000 Cost of goods sold Gross margin Selling and administrative expenses 2,000,000 1,600,000 560,000 $1,040,000 Net income 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. $3 per unit $13 per unit $3 per unit 6 per unit Direct materials Direct labor Variable overhead Fixed overhead ($600,000 100,000 units) Required: 1. Prepare an income statement for the company under variable costing. Required: 1. Prepare an income statement for the company under variable costing. TREZ Company Variable Costing Income Statement Sales 3,600,000 Less: Variable costs Direct materials 3 Direct labor 13 Variable overhead 3 Total variable costs 19 Net income (loss)
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