Kelly Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2017, the company incurred the following costs. Variable Cost per Unit Direct materials Direct labor $7.50 $2.25 Variable manufacturing overhead $6.00 Variable selling and administrative expenses $4.00 Fixed Costs per Year Fixed manufacturing overhead $290,000 Fixed selling and administrative expenses $237,300 Kelly Company sells fishing lures for $28. During 2017, the company sold 80,000 lures and produced 100,000 lures. Instructions (a) Assuming the company uses variable costing, calculate Kelly's manufacturing cost per unit for 2017. (b) Assuming the company uses absorption costing, calculate Kellys manufacturing cost per unit for 2017. (c) Prepare an absorption costing income statement for 2017.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Kelly Company builds custom fishing lures for sporting goods stores. In its first year of
operations, 2017, the company incurred the following costs.
Variable Cost
per Unit
Direct materials
$7.50
$2.25
Variable manufacturing overhead
$6.00
Variable selling and administrative expenses $4.00
Fixed Costs per Year
Fixed manufacturing overhead $290,000
Fixed selling and administrative expenses $237,300
Kelly Company sells fishing lures for $28. During 2017, the company sold 80,000 lures and
produced 100,000 lures.
Instructions
Direct labor
(a) Assuming the company uses variable costing, calculate Kelly's manufacturing cost per unit for
2017.
(b) Assuming the company uses absorption costing, calculate Kellys manufacturing cost per unit
for 2017.
(c) Prepare an absorption costing income statement for 2017.
Transcribed Image Text:Kelly Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2017, the company incurred the following costs. Variable Cost per Unit Direct materials $7.50 $2.25 Variable manufacturing overhead $6.00 Variable selling and administrative expenses $4.00 Fixed Costs per Year Fixed manufacturing overhead $290,000 Fixed selling and administrative expenses $237,300 Kelly Company sells fishing lures for $28. During 2017, the company sold 80,000 lures and produced 100,000 lures. Instructions Direct labor (a) Assuming the company uses variable costing, calculate Kelly's manufacturing cost per unit for 2017. (b) Assuming the company uses absorption costing, calculate Kellys manufacturing cost per unit for 2017. (c) Prepare an absorption costing income statement for 2017.
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