Write 350 words after completing Exercise 19-17 in WileyPLUS

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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.