*E19-17 Polk Company builds custom fishing lures for sporting goods 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.
(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.
Write a paper of no more than 350 words after completing Exercise 19-17 in which you respond to the following questions:
U must answer A, B & C, D than the paper of no more than 350 words.
Write a paperthat is at least 750 words (papers less than 750 words, will receive a reduction in points) in which you respond to the Broadening Your Perspective 17-2 activity titled "Managerial Perspective" in Ch. 17 of Accounting. U must write a paper based on the math figures
BYP17-2 Ideal Manufacturing Company of Sycamore, Illinois, has supported a research and development
(R&D) department that has for many years been the sole contributor to the company’s new farm machinery
products. The R&D activity is an overhead cost center that provides services only to in-house manufacturing
departments (four different product lines), all of which produce agricultural/farm/ranch related machinery products.
The department has never sold its services outside, but because of its long history of success, larger manufacturers
of agricultural products have approached Ideal to hire its R&D department for special projects. Because the costs of
operating the R&D department have been spiraling uncontrollably, Ideal’s management is considering entertaining
these outside approaches to absorb the increasing costs. But,
(1) management doesn’t have any cost basis for charging R&D services to outsiders, and
(2) it needs to gain control of its R&D costs. Management decides to implement an activity-based costing system in
order to determine the charges for both outsiders and the in-houseusers of the department’s services.
R&D activities fall into four pools with the following annual costs.
Market analysis $1,050,000
Product design 2,350,000
Product development 3,600,000
Prototype testing 1,400,000
Activity analysis determines that the appropriate cost drivers and their usage for the four activities are:
Activities Cost Drivers Estimated Drivers
Market analysis Hours of analysis 15,000 hours
Product design Number of designs 2,500 designs
Product development Number of products 90 products
Prototype testing Number of tests 500 tests
(a) Compute the activity-based overhead rate for each activity cost pool.
(b) How much cost would be charged to an in-house manufacturing department that consumed
1,800 hours of market analysis time, was provided 280 designs relating to 10 products, andrequested 92
(c) How much cost would serve as the basis for pricing an R&D bid with an outside company on a contract that
would consume 800 hours of analysis time, require 178 designs relating to 3 products, and result in 70 engineering
(d) What is the benefit to Ideal Manufacturing of applying activity-based costing to its R&D activity for both in-
house and outside charging purposes?
|Due By (Pacific Time)||01/18/2014 12:00 am|
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