The Polk Company

The Polk Company builds custom fishing lures for sporting goods stores. In its 1st year of operations, 2012, the company incurred the following costs:Variable Costs per Unit:Direct Materials $7.50Dirct Labor $2.45Variable Manufacturing overhead %5.75Variable Selling & Admn Expenses $3.90Fixed Costs Per YearFixed Manufacturing Overhead $234,650Fixed Selling & Admn Expenses $240,100Polk Company sells the fishing lures for $25. During 2012, the company sold 80,000 lures and produced 95,000 lures. a)Assuming the company uses variable costing, calculate Polk’s manufacturing cost per unit for 2012b)Assuming the company uses absorption costing, calculate Polk’s manufacturing cost per unit for 2012In 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?