Polk Company builds custom fishing lures for sporting goods stores. In its first
ID: 2487738 • Letter: P
Question
Polk Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2012, the company incurred the following costs.
Polk Company sells the fishing lures for $27.50. During 2012, the company sold 81,300 lures and produced 96,200 lures.
Instructions
(a) Assuming the company uses variable costing, calculate Polk’s manufacturing cost per
unit for 2012.
(b) Prepare a variable costing income statement for 2012.
(c) Assuming the company uses absorption costing, calculate Polk’s manufacturing cost
per unit for 2012.
(d) Prepare an absorption costing income statement for 2012.
Variable Cost per Unit Direct materials $8.25 Direct labor $2.70 Variable manufacturing overhead $6.33 Variable selling and administrative expenses $4.29 Fixed Costs per Year Fixed manufacturing overhead $261,664 Fixed selling and administrative expenses $264,110Explanation / Answer
a) Variable cost per unit = $ 17.28 per unit
b) Variable costing income statement
C) Manufacturing cost per unit by using absorption costing = $ 20 per unit
D) Absorption costing Income statement
Sale Value 2,645,500 Less: Variable Cost Direct Materials 793,650 Direct Labor 259,740 Variable Manufacturing overhead 608,946 Variable selling and administrative 348,777 2,011,113 Contribution margin 634,387 Fixed expenses: Fixed Manufacturing overhead 261,664 Fixed selling and administrative 264,110 525,774 Net operating income / (loss) 108,613