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 (80,000 units à $40 per unit) $ 3,200,000 Cost of goods sold Beginning inventory $ 0 Cost of goods manufactured (100,000 units à $20 per unit) 2,000,000 Cost of good available for sale 2,000,000 Ending inventory (20,000 à $20) 400,000 Cost of goods sold 1,600,000 Gross margin 1,600,000 Selling and administrative expenses 610,000 Net income $ 990,000
Additional Information
Selling and administrative expenses consist of $450,000 in annual fixed expenses and $2 per unit in variable selling and administrative expenses.
The company's product cost of $20 per unit is computed as follows.
Direct materials $ 3 per unit Direct labor $ 9 per unit Variable overhead $ 2 per unit Fixed overhead ($600,000 / 100,000 units) $ 6 per unit
Required:
1. Prepare an income statement for the company under variable costing.
TREZ Company Variable Costing Income Statement Sales Plus: Cost of goods sold Net income (loss)
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 (80,000 units à $40 per unit) | $ | 3,200,000 | |||||
| Cost of goods sold | |||||||
| Beginning inventory | $ | 0 | |||||
| Cost of goods manufactured (100,000 units à $20 per unit) | 2,000,000 | ||||||
| Cost of good available for sale | 2,000,000 | ||||||
| Ending inventory (20,000 Ã $20) | 400,000 | ||||||
| Cost of goods sold | 1,600,000 | ||||||
| Gross margin | 1,600,000 | ||||||
| Selling and administrative expenses | 610,000 | ||||||
| Net income | $ | 990,000 | |||||
Additional Information
Selling and administrative expenses consist of $450,000 in annual fixed expenses and $2 per unit in variable selling and administrative expenses.
The company's product cost of $20 per unit is computed as follows.
| Direct materials | $ | 3 | per unit | ||
| Direct labor | $ | 9 | per unit | ||
| Variable overhead | $ | 2 | per unit | ||
| Fixed overhead ($600,000 / 100,000 units) | $ | 6 | per unit | ||
Required:
1. Prepare an income statement for the company under variable costing.
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Related questions
Delaney Company has the following flexible budget formulas and amounts:
| Selling price per unit | $54.00 |
| Direct materials per unit | 18.00 |
| Direct labor per unit | 12.00 |
| Variable factory overhead per unit | 7.00 |
| Variable selling and administrative expenses per unit | 4.00 |
| Fixed factory overhead | $450,000 |
| Fixed selling and administrative expenses | 100,000 |
Actual results for the month of October for the production and sale of 48,000 units were as follows:
| Sales revenue | $2,605,000 |
| Direct materials | 868,000 |
| Direct labor | 572,000 |
| Variable factory overhead | 334,000 |
| Variable selling and administrative expenses | 195,000 |
| Fixed factory overhead | 458,000 |
| Fixed selling and administrative expenses | 105,000 |
Prepare a performance report for the month of October.
| Beginning inventory | 0 |
| Units produced | 49,000 |
| Units sold | 44,000 |
| Selling price per unit | $81 |
| Selling and administrative expenses: | |
| Variable per unit | $2 |
| Fixed (total) | $562,000 |
| Manufacturing costs: | |
| Direct materials cost per unit | $18 |
| Direct labor cost per unit | $9 |
| Variable manufacturing overhead cost perunit | $4 |
| Fixed manufacturing overhead cost(total) | $980,000 |
| Assume that the company uses variable costing. |
| (a) | Determine the unit product cost. (Omit the "$" sign in your response.) |
| Unit product cost | $ |
| (b) | Prepare a contribution format income statement for May. (Input all amounts as positive values. Omit the "$" sign in yourresponse.) |
| (Click to select)Variable manufacturing costsBeginninginventorySalesEnding inventoryGoods available for sale | $ | |
| Variable expenses: | ||
| (Click to select)Goodsavailable for saleVariable cost of goods soldSalesEndinginventoryVariable selling and administrative expenses | $ | |
| (Click to select)SalesVariableselling and administrative expensesGoods available for saleEndinginventoryVariable cost of goods sold |
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| (Click to select)Variable manufacturingcostsContribution marginFixed manufacturing overheadBeginninginventoryEnding inventory | ||
| Fixed expenses: | ||
| (Click to select)Goodsavailable for saleFixed manufacturing overheadFixed selling andadministrative expensesSalesEnding inventory | ||
| (Click to select)SalesFixedmanufacturing overheadFixed selling and administrativeexpensesGoods available for saleEnding inventory |
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| (Click to select)Net operating incomeNet operatingloss | $ | |
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