Question

Problem 19-2A Variable costing income statement and converslon to absorption costing Income LO P2, РЗ 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. $3,680, eee Sales (80,e08 units $45 per unit) Cost of goods sold Beginning inventory Cost of goods manufactured (1e0,eee units $25 per unit) Cost of good available for sale Ending inventory (20,eeex $25) Cost of goods sold Gross margin Selling and administrative expenses 2,580,eee 2,5ee, eee 580, еeе 2,eee, eee 1,6e0,eee 560,eee $1,840, eee 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. $5 per unit $7 per unit $4 per unit $9 per unit Direct materials Direct labor Variable overhead Fixed overhead ($980,eee18e, eee units) Requlred: 1. Prepare an income statement for the company under variable costing. TREZ Company Variable Costing Income Statement Net income (loss)

Answer 1

$ 3,600,000 TREZ COMPANY Variable Costing Income Statement Sales (80000 * $ 45) Less : Variable Costs Direct materials (80000* $5) $(400,000) Direct labour (80000* $7) $(560,000) Variable Manufacturing Overhead (80000* $ 4) $(320,000) Variable Selling & administrative expenses (80000 * $ 2) $ (160,000) Total Variable Costs Contribution Margin Less : Fixed Costs Fixed Manufacturing Overhead (100000 *$9) $(900,000) Fixed Selling & Administrative Overhead $(400,000) Total Fixed Costs Net Income (Loss) $(1,440,000) $ 2,160,000 $(1,300,000) $ 860,000