Polk Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2012, the company incurred the following costs.

Polk Company sells the fishing lures for $25. During 2012, the company sold 80,000 lures and produced 95,000 lures.
Instructions

(a) Assuming the company uses variable costing, calculate Polk’s manufacturing cost per unit for 2012.

(b) Prepare a variable costing income statement for 2012.

(c) Assuming the company uses absorption costing, calculate Polk’s manufacturing cost per unit for 2012.

(d) Prepare an absorption costing income statement for 2012.

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Variable Cost per Unit Direct materials $7.50 Direct labor $2.45 Variable manufacturing overhead $5.75 Variable selling and administrative expenses $3.90 Fixed Costs per Year Fixed manufacturing overhead $234,650 Fixed selling and administrative expenses $240,100