Chapter 6, Problem 6.17E

Compute product cost and prepare an income statement under variable and absorption costing.

(LO 5), AP

Siren Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2017, the company incurred the following costs.

Variable Costs per Unit
Direct materials	$7.50
Direct labor	$3.45
Variable manufacturing overhead	$3.80
Variable selling and administrative expenses	$3.90
Fixed Costs per Year
Fixed manufacturing overhead	$225,000
Fixed selling and administrative expenses	$210,100

Siren Company sells the fishing lures for $23. During 2017, the company sold 80,000 lures and produced 90,000 lures.

Instructions

(a) Assuming the company uses variable costing, calculate Sirens manufacturing cost per unit for 2017.

(b) Prepare a variable costing income statement for 2017.

(c) Assuming the company uses absorption costing, calculate Sirens manufacturing cost per unit for 2017.

(d) Prepare an absorption costing income statement for 2017.