Torres 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 its first year of operation follows:
Sales (80,000 units x $50 per unit)………………………………………. $4,000,000
Cost of goods sold
Beginning inventory……………………………………………… $ 0
Cost of goods manufactured (100,000 units x $30 per unit) 3,000,000
Cost of goods available for sale……………………………….. 3,000,000
Ending inventory (20,000 units x $30)………………………… 600,000
Cost of goods sold………………………………………………. 2,400,000
Gross margin…………………………………………………………….. 1,600,000
Selling and administrative expenses…………………………………….. 530,000
Net income………………………………………………………………. 1,070,000
Additional information:
a. Selling and administrative expenses consist of $350,000 in annual fixed expenses and $2.25 per unit in variable selling and administrative expenses.