Exercise 19-17 Polk Company builds custom fishing lures for sporting goods store

Question

Exercise 19-17

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                                                        $7.88

Direct labor                                                              $2.57

Variable manufacturing overhead                                $6.04

Variable selling and adminstrative expenses                $4.10

Fixed Costs per Year

Fixed manufacturing overhead                                    $246,568

Fixed selling and adminstrative expenses                   $252,105

Polk Company sells the fishing lures for $26.25. During 2012, the company sold 80,400 lures and produced 95,200 lures.

Assuming the company uses variable costing, calculate Polk's manufacturing cost per unit for 2012.

Prepare a variable costing income statement for 2012

Explanation / Answer

Income Statement Prepared Using Variable Costing Polk Company Income Statement For the Year Ending December 31, 2012 Sales $ 2,110,500.00 Less variable costs: Direct Material $750,176 Direct labor $244,664 Variable manufacturing overhead $575,008 Less: Ending Inventory $244,052 Variable cost of good sold $330,956 Variable selling expense 329,640 $    660,596.00 Contribution margin $ 1,449,904.00 Less fixed costs: Fixed manufacturing expense 246,568 Fixed selling & administrative expense 252,105 $    498,673.00 Net income $    951,231.00

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