Polk Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2012, the company incurred the following costs.

Variable Cost per Unit
Direct materials ???$7.50
Direct labor ???$2.45
Variable manufacturing overhead ???$5.75
Variable selling and administrative expenses ???$3.90

Fixed Costs per Year
Fixed manufacturing overhead $234,650
Fixed selling and administrative expenses $240,100

Polk Company sells the fishing lures for $25. During 2012, the company sold 80,000 lures and produced 95,000 lures.

(a) Assuming the company uses variable costing, calculate Polk’s manufacturing cost per unit for 2012.

(b) Prepare a variable costingincome 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

#1 In this case , would it be better to use the variable or absorption costing method, and why?

#2What are the benefits of the two methods?

Which method would lead to the best decision when a competitor is submitting a lower bid for your product?

Polk Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2012, the company incurred the following costs.

Variable Cost per Unit
Direct materials ???$7.50
Direct labor ???$2.45
Variable manufacturing overhead ???$5.75
Variable selling and administrative expenses ???$3.90

Fixed Costs per Year
Fixed manufacturing overhead $234,650
Fixed selling and administrative expenses $240,100

Polk Company sells the fishing lures for $25. During 2012, the company sold 80,000 lures and produced 95,000 lures.

(a) Assuming the company uses variable costing, calculate Polk’s manufacturing cost per unit for 2012.

(b) Prepare a variable costingincome 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

#1 In this case , would it be better to use the variable or absorption costing method, and why?

#2What are the benefits of the two methods?

Which method would lead to the best decision when a competitor is submitting a lower bid for your product?