Trez Company began operations this year. During this first year, the company pro

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 Sales (8e,eee units x $45 per unit) Cost of goods sold $3,600,0ee Beginning inventory Cost of goods manufactured (100,000 units x $25 per unit) Cost of good available for sale Ending inventory (2e,eee x $25) Cost of goods sold 2,500,0ee 2,50,ee Gross margin Selling and administrative expenses Net income 2,000,8ee 1,600,ee 530,e $1,07,0ee Additionel Information a. Selling and administrative expenses consist of $350,000 In annual fixed expenses and $225 per unit In variable selling and administrative expenses b. The company's product cost of $25 per unit Is computed as follows. Direct materials Direct labor Variable overhead Fixed overhead ($600,000 100,eee units) $ 5 per unit $11 per unit $ 3 per unit $ 6 per unit

Explanation / Answer

TREZ Company

Variable costing income statement :

Sales (80000*45) 3600000 Less: Variable cost Direct material (80000*5) 400000 Direct labour (80000*11) 880000 Variable manufacturing overhead (80000*3) 240000 Variable selling and administrative expense (80000*2.25) 180000 Total variable expense 1700000 Contribution margin 1900000 Fixed expense Fixed manufacturing overhead 600000 Fixed selling and administrative expense 350000 Total fixed expense 950000 Net income (loss) 950000

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