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Essay Available:
Pages:
2 pages/≈550 words
Sources:
2 Sources
Level:
APA
Subject:
Accounting, Finance, SPSS
Type:
Math Problem
Language:
English (U.S.)
Document:
MS Word
Date:
Total cost:
$ 9.36
Topic:

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

Variable Manufacturing Overhead



5.75

Manufacturing Cost Per Unit



15.7





* Manufacturing Cost Per Unit: Absorption Cost Method



Direct Material



7.5

Direct Labor



2.45

Variable Manufacturing Overhead



5.75

Fixed Manufacturing Overhead



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

Variable selling and administration

(80,000*3.90)


312,000




1,228,000

Less: Period costs




Selling and Administration


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

Less: Selling and Administration Expenses




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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