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E19-17 Polk Company builds custom

Price: $1.99


*E19-17 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.

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.

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