Klumm Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2011, the company incurred the following costs.
- Variable Cost per Unit
- Direct materials $6.50
- Direct labor $2.75
- Variable manufacturing overhead $5.75
- Variable selling and administrative expenses $3.90
- Fixed Costs per Year
- Fixed manufacturing overhead $285,000
- Fixed selling and administrative expenses $240,100
Klumm Company sells the fishing lures for $25. During 2011, the company sold 80,000 lures and produced 95,000 lures.
Instructions
(a) Assuming the company uses variable costing, calculate Klumm's manufacturing cost per unit for 2011.
(b) Prepare a variable costing income statement for 2011.
(c) Assuming the company uses absorption costing, calculate Klumm's manufacturing cost per unit for 2011.
(d) Prepare an absorption costing income statement for 2011.