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 administrative expenses $4.10 Fixed Costs per Year Fixed manufacturing overhead $245,273 Fixed selling and administrative expenses $252,105 Polk Company sells the fishing lures for $26.25. During 2012, the company sold 80,500 lures and produced 94,700 lures.

(b)

Prepare a variable costing income statement for 2012.

POLK COMPANY
Income Statement
For the Year Ended December 31, 2012
Variable Costing

Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses

$

Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses

$

Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses

Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses

Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses

Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses

Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses

$

POLK COMPANY
Income Statement
For the Year Ended December 31, 2012
Variable Costing

Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses

$

Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses

$

Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses

Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses

Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses

Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses

Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses

$

Explanation / Answer

Variable cost of goods sold per unit = 7.88+2.57+6.04=16.49

sales    [80500*26.25] 2,113,125 Less:Variable cost of goods sold   [16.49*80500] 1,327,445 variable selling and administrative expense [4.10 *80500] 330,050 Total variable cost 1,657,495 Contribution margin 455,630 Less:Fixed manufacturing 245273 Fixed selling and adm.expense 252105 497378 Net income /(loss) -41748

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