Problem 6-2A (Algo) Variable costing income statement LO P2 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 $45 per unit) Cost of goods sold Gross profit Selling and administrative expenses Incone $3,600,000 2,000,000 1,600,000 540,000 $1,060,000 Additional Information a. Selling and administrative expenses consist of $400,000 in annual fixed expenses and $1.75 per unit in variable selling and administrative expenses. b. The company's product cost of $25 per unit consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($700,000/100,000 units) $5 per unit $11 per unit $2 per unit $7 per unit Required: Prepare an income statement for the company under variable costing.

Problem 6-2A (Algo) Variable costing income statement LO P2 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 $45 per unit) Cost of goods sold Gross profit Selling and administrative expenses Incone $3,600,000 2,000,000 1,600,000 540,000 $1,060,000 Additional Information a. Selling and administrative expenses consist of $400,000 in annual fixed expenses and $1.75 per unit in variable selling and administrative expenses. b. The company's product cost of $25 per unit consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($700,000/100,000 units) $5 per unit $11 per unit $2 per unit $7 per unit Required: Prepare an income statement for the company under variable costing.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter2: Basic Managerial Accounting Concepts

Section: Chapter Questions

Problem 26BEA

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Question No. 4: Absorption and Marginal Costing The Dorset Corporation produces and sells a single product. The following data refer to the year just completed: Beginning inventory 0 Units produced 9,000 Units sold 7,000 Selling price per unit $ 47 Selling and administrative expenses: Variable per unit $ 4 Fixed per year $ 58,000 Manufacturing costs: Direct materials cost per unit $ 10 Direct labor cost per unit $ 6 Variable manufacturing overhead cost per unit $ 5 Fixed manufacturing overhead per year $ 90,000 Assume that direct labor is a variable cost. Required: Prepare an income statement for the year using absorption costing Prepare an income statement for the year using variable costing Reconcile the absorption costing and variable costing net operating income figures