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?
Exercise 19-17
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
$7.88
Direct labor
$2.57
Variable manufacturing overhead
$6.04
Variable selling and administrative expenses
$4.10
Fixed Costs per Year
Fixed manufacturing overhead
$246,568
Fixed selling and administrative expenses
$252,105
Polk Company sells the fishing lures for $26.25. During 2012, the company sold 80,600 lures and produced 95,200 lures.
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