Question

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. $4,000, eee Sales (se, eee units * $50 per unit) Cost of goods sold Beginning inventory Cost of goods manufactured (100,eee units * $3e per unit) Cost of good avaitable for sale Ending inventory t2e,eee x $38) Cost of goods sold Gross margin Selling and administrative expenses Net income 3,eee eee 3,000,000 600.000 2,400,000 1,600,000 530,000 $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 is computed as follows.

Answer 1

Answer-1)-

Trez Company
Income statement (Using variable costing approach)
Particulars			Amount
			$
Sales (a)	80000 units*$50 per unit		4000000
Less:- Variable cost of goods sold (b)
Opening inventory		NIL
Add:- Variable cost of goods manufactured		2100000
Direct materials	100000 units*$5 per unit	500000
Direct labor	100000 units*$14 per unit	1400000
Variable manufacturing overhead	100000 units*$2 per unit	200000
Variable cost of goods available for sale		2100000
Less:- Closing inventory	20000 units*$21 per unit	420000	1680000
Gross contribution margin C= a-b			2320000
Less:-Variable selling & administrative exp.	80000 units*$2.25 per unit		180000
Contribution margin			2140000
Less:- Fixed costs
Manufacturing overhead			900000
Selling & administrative exp.			350000
Net Income			890000

Explanation-Unit product cost under Variable costing:-Direct materials + Direct Labor+ Variable manufacturing overhead

=$5+$14+$2 = $21 per unit