Polk Company builds custom fishing lures for sporting goods stores. In its first

Question

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

$8.10

Direct labor

$2.65

Variable manufacturing overhead

$6.21

Variable selling and administrative expenses

$4.21

Fixed Costs per Year

Fixed manufacturing overhead

$253,650

Fixed selling and administrative expenses

$259,308

Polk Company sells the fishing lures for $27.00. During 2012, the company sold 80,800 lures and produced 95,000 lures.

(a)

Assuming the company uses variable costing, calculate Polk’s manufacturing cost per unit for 2012. (Round answer to 2 decimal places, e.g.10.50.)

Variable Cost per Unit

Direct materials

$8.10

Direct labor

$2.65

Variable manufacturing overhead

$6.21

Variable selling and administrative expenses

$4.21

Fixed Costs per Year

Fixed manufacturing overhead

$253,650

Fixed selling and administrative expenses

$259,308

Explanation / Answer

Calculation of Manufacturing Cost per unit under Variable Costing Direct Material 8.1 Direct Labour 2.65 Variable Manufacturing Overheads 6.21 Manufacturing Cost per unit 16.96

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