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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 Costing) Sales (80,000 units × $50 per unit) Cost of goods sold Gross profit Selling and administrative expenses 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 $30 per unit consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($600,000 / 100,000 units) Required: Prepare an income statement for the company under variable costing. Sales Less: Variable expenses Variable cost of goods sold Variable selling and administrative expenses Total variable costs Contribution margin Less: Fixed expenses Fixed overhead Fixed selling and administrative costs Total fixed expenses Income 4,000,000 2,400,000 1,600,000 560,000 1,040,000 Answer is complete but not entirely correct. TREZ Company Income Statement (Variable Costing) > $3 per unit $ 18 per unit $3 per unit $6 per unit ●●00 $2,400,000 X 160,000 $ 600,000 400,000 4,000,000 2,560,000 1,920,000 1,000,000 $ 920,000

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 × $50 per unit) Cost of goods sold Gross profit Selling and administrative expenses 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 $30 per unit consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($600,000 / 100,000 units) Required: Prepare an income statement for the company under variable costing. Sales Less: Variable expenses Variable cost of goods sold Variable selling and administrative expenses Total variable costs Contribution margin Less: Fixed expenses Fixed overhead Fixed selling and administrative costs Total fixed expenses Income 4,000,000 2,400,000 1,600,000 560,000 1,040,000 Answer is complete but not entirely correct. TREZ Company Income Statement (Variable Costing) > $3 per unit $ 18 per unit $3 per unit $6 per unit ●●00 $2,400,000 X 160,000 $ 600,000 400,000 4,000,000 2,560,000 1,920,000 1,000,000 $ 920,000

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter7: Variable Costing For Management analysis
Section: Chapter Questions
Problem 9E: The following data were adapted from a recent income statement of Caterpillar Inc. (CAT) for the...
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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 Costing) Sales (80,000 units × $50 per unit) Cost of goods sold Gross profit Selling and administrative expenses 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 $30 per unit consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($600,000 / 100,000 units) $ 4,000,000 2,400,000 1,600,000 560,000 $ 1,040,000 Sales Less: Variable expenses Variable cost of goods sold Variable selling and administrative expenses Required: Prepare an income statement for the company under variable costing. Total variable costs Contribution margin Less: Fixed expenses Fixed overhead Fixed selling and administrative costs Total fixed expenses Income $3 per unit $ 18 per unit $3 per unit $6 per unit Answer is complete but not entirely correct. TREZ Company Income Statement (Variable Costing) $2,400,000 X 160,000✔ $ 600,000 400,000 $ 4,000,000 2,560,000 1,920,000 1,000,000 $ 920,000
Transcribed Image Text: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 × $50 per unit) Cost of goods sold Gross profit Selling and administrative expenses 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 $30 per unit consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($600,000 / 100,000 units) $ 4,000,000 2,400,000 1,600,000 560,000 $ 1,040,000 Sales Less: Variable expenses Variable cost of goods sold Variable selling and administrative expenses Required: Prepare an income statement for the company under variable costing. Total variable costs Contribution margin Less: Fixed expenses Fixed overhead Fixed selling and administrative costs Total fixed expenses Income $3 per unit $ 18 per unit $3 per unit $6 per unit Answer is complete but not entirely correct. TREZ Company Income Statement (Variable Costing) $2,400,000 X 160,000✔ $ 600,000 400,000 $ 4,000,000 2,560,000 1,920,000 1,000,000 $ 920,000
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