University of Phoenix ACC 561 - Polk Company

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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 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

 

#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?

 

 

 

    • 10 years ago
    University of Phoenix ACC 561 - Polk Company Solution
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