V. Variable costing income statement and conversion to absorption costing income Torres 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 its first year of operation follows: Sales (80,000 units x $50 per unit). $4,000,000 Cost of goods sold Beginning inventory $ 0 Cost of goods manufactured (100,000 units x $30 per unit) 3,000,000 Cost of goods available for sale.. 3,000,000 Ending inventory (20,000 units x $30) 600,000 Cost of goods sold. 2,400,000 Gross margin.. 1,600,000 Selling and administrative expenses.. 530,000 Net income. 1,070,000 Additional information: b. The companys product cost of $30 per unit is computed as follows: Direct materials.. $5 per unit Direct labor. $14 per unit Variable overhead. $2 per unit Fixed overhead ($900,000/100,000 units) $9 per unit