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 Costing) Sales (80,000 units × $45 per unit)$ 3,600,000Cost of goods sold2,000,000Gross profit1,600,000Selling and administrative expenses560,000Income$ 1,040,000 Additional InformationSelling and administrative expenses consist of $400,000 in annual fixed expenses and $2 per unit in variable selling and administrative expenses.The company's product cost of $25 per unit consists of the following. Direct materials$ 4per unitDirect labor$ 10per unitVariable overhead$ 4per unitFixed overhead ($700,000 / 100,000 units)$ 7per unitRequired:Prepare an income statement for the company under variable costing. TREZ CompanyIncome Statement (Variable Costing)

Income statement refers to the financial record which reflect the total revenue generated by ac…

Answered: Income Statement (Absorption Costing)…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section: Chapter Questions

Problem 2QTD

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Question

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 Costing)
Sales (80,000 units × $45 per unit)	$ 3,600,000
Cost of goods sold	2,000,000
Gross profit	1,600,000
Selling and administrative expenses	560,000
Income	$ 1,040,000

Additional Information

Selling and administrative expenses consist of $400,000 in annual fixed expenses and $2 per unit in variable selling and administrative expenses.
The company's product cost of $25 per unit consists of the following.