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Trez Company began operations this year. During this year, the company produced 100,000 units and sold 80,000 units. The absorption costing income statement for this

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Trez Company began operations this year. During this year, the company produced 100,000 units and sold 80,000 units. The absorption costing income statement for this year follows. Income Statement (Absorption Costibg) Sales (80,000 units X $50 per unit) $ 4,000,000 Cost of goods sold 2,400,000 Gross profit 1,600,000 Selling and administrative expenses 530,000 Income $ 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 $30 per unit consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($900,000 / 100,000 units) $ 5 per unit $ 14 per unit $ 2 per unit $ 9 per unit Required: Prepare an income statement for the company under variable costing. TREZ Company Income Statement (Variable Costing) $ 4,000,000 Sales Less: Variable expenses Variable cost of goods sold Variable selling and administrative expenses Contribution margin Less: Fixed expenses Fixed overhead Fixed selling and administrative costs Income $ 890,000 TREZ Company Income Statement (Variable Costing) Sales $ 4,000,000 Less: Variable expenses Variable cost of goods sold Variable selling and administrative expenses Contribution margin Less: Fixed expenses Fixed overhead Fixed selling and administrative costs Income $ 890,000

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