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2 pages/≈550 words
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Level:
APA
Subject:
Accounting, Finance, SPSS
Type:
Math Problem
Language:
English (U.S.)
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# Manufacturing Cost Per Unit: Variable Cost Method, Costing Methods for Polk Company (Math Problem Sample)

Instructions:

CALCULATE THE COST OF PRODUCTION FOR POLK COMPANY SING VARIABLE COST AND ABSORPTION COST METHODS.
BRIEFLY, EXPLAIN THE PROS AND CONS FOR EACH METHOD AND GIVE A REASON AS TO WHICH METHOD IS BETTER.

source..
Content:

Costing Methods for Polk Company

* Manufacturing Cost Per Unit: Variable Cost Method

\$

Direct Material

7.5

Direct Labor

2.45

5.75

Manufacturing Cost Per Unit

15.7

* Manufacturing Cost Per Unit: Absorption Cost Method

Direct Material

7.5

Direct Labor

2.45

5.75

2.47*

Manufacturing Cost Per Unit

18.17

Note: 1. * Fixed Manufacturing Overhead(2.47) is calculated as,

234,650

95,000

2. Fixed manufacturing overhead is not used in calculating the cost per unit of lures under variable cost.

3. Both variable and fixed Selling and administration expenses are not relevant in computing per unit cost

* Variable Costing Income Statement

Sales

(80,000 * 25)

2,000,000

Less: Variable cost of goods sold

Variable cost of goods available for sale

(95,000*5.75)

546,250

Closing Inventory

(95,000-80,000) *5.75

186,250

-460,000

Gross contribution margin

1,540,000

(80,000*3.90)

312,000

1,228,000

Less: Period costs

240,100

Manufacturing

234,650

-474,750

Net Operating Income

753,250

* Absorption Costing Income Statement

Sales

(80,000 * 25)

2,000,000

Less: Cost of Goods Sold

Cost of Goods Manufactured

(95000*8.22)

780,900

Closing Inventory

(15,000*8.22)

-123,300

-657,600

Gross Profit

1,342,400

Fixed

240,100

Variable

800,000*3.90

312,000

-552,100

753,200

Note: Manufacturing Cost per Unit is calculated as follows.
Variable Cost

5.75

Fixed Cost

234,650

95,000 2.47
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