5. Polk Company builds custom fishing lures
for sporting goods stores. In its first year of operations, 2012, the company
incurred the following costs.
Cost per Unit
Direct materials —$8.10
Variable manufacturing overhead—-$6.21
Variable selling and administrative
Costs per Year
Fixed manufacturing overhead– $254,184
Fixed selling and administrative expenses—$259,308
Company sells the fishing lures for $27.00. During 2012, the company sold
81,000 lures and produced 95,200 lures.
Assuming the company uses variable costing, calculate Polkâ€™s
manufacturing cost per unit for 2012. (Round answer to 2 decimal places,
Manufacturing cost per unit $16.96
In this case, would it be better to use the
variable or absorption costing method, and why
Which method would lead to the best
decision when a competitor is submitting a lower bid for your product?