ACC 561 week 5 Learning Team Deliverable

Write a paper of no more than 350 words after completing Exercise 19-17 in WileyPLUS in which you respond to the following questions:
• In this case, would it be better to use the variable or absorption costing method, and why?
• What are the benefits of the two methods?
• Which method would lead to the best decision when a competitor is submitting a lower bid for your product?
• Compute product cost and prepare an income statement under variable and absorption costing.

E19-17 Polk Company builds custom fishing lures for sporting stores. In its first year of operations, 2012, the company incurred the following costs.

                        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

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 per unit for 2012.

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

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

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