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. (a) Your answer is correct. 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.) Manufacturing cost per unit $16.49 Correct (b) Your answer is partially correct. Try again. Prepare a variable costing income statement for 2012. POLK COMPANY Income Statement For the Year Ended December 31, 2012, Variable Costing By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor. (c) Your answer is incorrect. Try again. Assuming the company uses absorption costing, calculate Polk’s manufacturing cost per unit for 2012. (Round answer to 2 decimal places, e.g.10.50.) Manufacturing cost per unit $ By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor. (d) The parts of this question must be completed in order. This part will be available when you complete the part above.

Explanation / Answer

a Calculation of Polk's manufacturing cost per unit using variable costing Variable costing Direct Material $                           7.88 Direct Labor $                           2.57 Variable manufacturing overhead $                           6.04 Manufacturing cost per unit $                        16.49 b Variable costing Income statements: Sales (80,500 lures x $ 26.25 per lure) $                    21,13,125 Less: Variable cost of goods sold Beginning Inventory $                                 - Add Variable cost of goods manufactured (94,700 units x $ 16.49) $                15,61,603 Cost of goods available for sale $                15,61,603 Less ending inventory (14,200 lures x $16.49) $                  2,34,158 $                    13,27,445 Gross Contribution Margin $                      7,85,680 Less Variable selling and administrative expenses (80,500 lures x $ 4.10) $                      3,30,050 Contribution Margin $                      4,55,630 Less: Fixed costs: Fixed Manufacturing overhead $                  2,45,273 Fixed selling and administrative expenses $                  2,52,105 $                      4,97,378 Net Operating Loss $                        -41,748 c Calculation of Polk's manufacturing cost per unit using absorption costing absorption costing Direct Material $                           7.88 Direct Labor $                           2.57 Variable manufacturing overhead $                           6.04 Fixed Manufacturing overhead $                           2.59 Manufacturing cost per unit $                        19.08

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