Question

Siren Company builds custom fishing lures for sporting goods stores. In its first year of operations,...

Siren Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2020, the company incurred the following costs.

Variable Costs per Unit

Direct materials

$9.75

Direct labor

$4.49

Variable manufacturing overhead

$7.54

Variable selling and administrative expenses

$5.07

Fixed Costs per Year

Fixed manufacturing overhead

$299,000

Fixed selling and administrative expenses

$273,130

Siren Company sells the fishing lures for $32.50. During 2020, the company sold 79,000 lures and produced 92,000 lures.

a. Assuming the company uses variable costing, calculate Siren’s manufacturing cost per unit for 2020.

Manufacturing cost per unit= $

b. Prepare a variable costing income statement for 2020.

Business   Accounting   
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Answer #1

A. Manufacturing cost per unit = Direct Materials + Direct Labor + Variable Manufacturing Overhead

= 9.75+4.49+7.54

= 21.78

.

Variable costing income statement for the year ended December 31, 2020

Sales (32.50*79,000) 2,567,500
Variable cost of goods sold (21.78*79,000) 1,720,620
Variable selling and administrative expenses (5.07*79,000) 400,530
2,121,150
Contribution margin 446,350
Fixed manufacturing overhead 299,000
Fixed selling and administrative expenses 273,130
572,130
Net income (loss) -125,780
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