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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